10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

ý Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For The Fiscal Year Ended December 31, 2005

or

oTransition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number 1-11527

Hospitality Properties Trust

Maryland	04-3262075
(State Of organization)	(IRS Employer Identification No.)

400 Centre Street, Newton, Massachusetts 02458

617-964-8389

Securities registered pursuant to Section 12(b) of the Act:

Title Of Each Class	Name Of Each Exchange On Which Registered
Common Shares of Beneficial Interest	New York Stock Exchange
Series B Cumulative Redeemable Preferred Shares of Beneficial Interest	New York Stock Exchange

Securities to be registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý  No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No ý

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “large accelerated filer and accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý  Accelerated filer o   Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o  No ý

The aggregate market value of the voting shares of the registrant held by non-affiliates was $2,973 million based on the $44.07 closing price per common share on the New York Stock Exchange on June 30, 2005. For purposes of this calculation, 4,000,000 common shares of beneficial interest, $0.01 par value, held by HRPT Properties Trust, and an aggregate of 448,434 common shares held by the trustees and officers of the registrant have been included in the number of shares held by affiliates.

Number of the registrant’s Common Shares outstanding as of March 10, 2006: 71,920,578

References in this Annual Report on Form 10-K to the “Company”, “HPT”, “we”, “us” or “our” include Hospitality Properties Trust and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required in Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K is to be incorporated herein by reference from our definitive Proxy Statement for the annual meeting of shareholders scheduled for May 23, 2006, or our definitive Proxy Statement.

WARNING CONCERNING FORWARD LOOKING STATEMENTS

THIS ANNUAL REPORT ON FORM 10-K CONTAINS STATEMENTS WHICH CONSTITUTE FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND OTHER FEDERAL SECURITIES LAWS. THESE FORWARD LOOKING STATEMENTS APPEAR IN A NUMBER OF PLACES IN THIS FORM 10-K AND INCLUDE STATEMENTS REGARDING OUR INTENT, BELIEF OR EXPECTATION, OR THE INTENT, BELIEF OR EXPECTATION OF OUR TRUSTEES AND OFFICERS WITH RESPECT TO OUR OPERATORS’ OR TENANTS’ ABILITY TO PAY RETURNS OR RENT TO US, OUR ABILITY TO PURCHASE ADDITIONAL PROPERTIES, OUR INTENT TO IMPROVE AND MODERNIZE OUR PROPERTIES, OUR ABILITY TO PAY INTEREST AND DEBT PRINCIPAL AND MAKE DISTRIBUTIONS, OUR POLICIES AND PLANS REGARDING INVESTMENTS AND FINANCINGS, OUR TAX STATUS AS A REAL ESTATE INVESTMENT TRUST, OUR ABILITY TO APPROPRIATELY BALANCE THE USE OF DEBT AND EQUITY AND TO RAISE CAPITAL AND OTHER MATTERS. HOWEVER, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN OR IMPLIED BY THE FORWARD LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS. SUCH FACTORS INCLUDE, WITHOUT LIMITATION, THE IMPACT OF CHANGES IN THE ECONOMY AND THE CAPITAL MARKETS (INCLUDING PREVAILING INTEREST RATES) ON US AND OUR OPERATORS AND TENANTS, COMPLIANCE WITH AND CHANGES TO LAWS AND REGULATIONS AFFECTING THE REAL ESTATE AND HOTEL INDUSTRIES, CHANGES IN FINANCING TERMS AND COMPETITION WITHIN THE REAL ESTATE AND HOTEL INDUSTRIES. FOR EXAMPLE: IF HOTEL ROOM DEMAND BECOMES DEPRESSED, THE OPERATING RESULTS OF OUR HOTELS MAY DECLINE; THE FINANCIAL RESULTS OF OUR OPERATORS AND TENANTS MAY DECLINE; AND OUR OPERATORS AND TENANTS MAY BE UNABLE TO PAY OUR RETURNS OR RENTS. ALSO, WE MAY BE UNABLE TO IDENTIFY PROPERTIES WHICH WE WANT TO BUY OR TO NEGOTIATE ACCEPTABLE PURCHASE PRICES OR MANAGEMENT AGREEMENT OR LEASE TERMS FOR NEW PROPERTIES. THESE UNEXPECTED RESULTS COULD OCCUR DUE TO MANY DIFFERENT REASONS, SOME OF WHICH, SUCH AS NATURAL DISASTERS OR CHANGES IN OUR OPERATORS’ OR TENANTS’ COSTS OR REVENUES OR CHANGES IN CAPITAL MARKETS OR THE ECONOMY GENERALLY, ARE BEYOND OUR CONTROL. IN ADDITION, THIS ANNUAL REPORT ON FORM 10-K STATES THAT OUR PURCHASE OF THE HOLIDAY INN SUNSPREE RESORT^® IN JAMAICA WAS DELAYED PENDING THIRD PARTY APPROVALS. IN FACT, CIRCUMSTANCES MAY DELAY THIS PURCHASE FOR AN EXTENDED PERIOD OR PREVENT IT OCCURRING. OTHER RISKS MAY ADVERSELY IMPACT US, AS DESCRIBED MORE FULLY UNDER “ITEM 1A. RISK FACTORS.” FORWARD LOOKING STATEMENTS ARE NOT GUARANTEED TO OCCUR AND MAY NOT OCCUR. YOU SHOULD NOT PLACE UNDUE RELIANCE UPON FORWARD LOOKING STATEMENTS. EXCEPT AS REQUIRED BY LAW, WE UNDERTAKE NO OBLIGATION TO RELEASE PUBLICLY THE RESULT OF ANY REVISION TO THESE FORWARD LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURANCE OF UNANTICIPATED EVENTS.

STATEMENT CONCERNING LIMITED LIABILITY

OUR AMENDED AND RESTATED DECLARATION OF TRUST, DATED AUGUST 21, 1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS AND SUPPLEMENTS THERETO, IS DULY FILED IN THE OFFICE OF THE STATE DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND, PROVIDES THAT THE NAME “HOSPITALITY PROPERTIES TRUST” REFERS TO THE TRUSTEES UNDER THE DECLARATION OF TRUST AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF

HOSPITALITY PROPERTIES TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, HOSPITALITY PROPERTIES TRUST. ALL PERSONS DEALING WITH HOSPITALITY PROPERTIES TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF HOSPITALITY PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

HOSPITALITY PROPERTIES TRUST

2005 FORM 10-K ANNUAL REPORT

Table of Contents

	Part I	Page
		1
Item 1.	Business
Item 1A.	Risk Factors	27
Item 1B.	Unresolved Staff Comments	31
Item 2.	Properties	32
Item 3.	Legal Proceedings	33
Item 4.	Submission of Matters to a Vote of Security Holders	33
	Part II
Item 5.	Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Securities	34
Item 6.	Selected Financial Data	35
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	51
Item 8.	Financial Statements and Supplementary Data	52
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	52
Item 9A.	Controls and Procedures	52
Item 9B.	Other Information	53
	Part III
Item 10.	Directors and Executive Officers of the Registrant	54
Item 11.	Executive Compensation	*
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters	54
Item 13.	Certain Relationships and Related Transactions	*
Item 14.	Principal Accountant Fees and Services	*
	Part IV
Item 15.	Exhibits and Financial Statement Schedules	56

*Incorporated by reference from our Proxy Statement for the annual meeting of shareholders scheduled to be held on May 23, 2006, to be filed pursuant to Regulation 14A.

PART I

Item 1. Business

The Company. We are a real estate investment trust, or REIT, formed in 1995 under the laws of the State of Maryland to buy and own hotels. As of December 31, 2005, we owned 298 hotels with 42,376 rooms or suites located in 38 states in the United States, Canada and Puerto Rico. Our principal place of business is 400 Centre Street, Newton, Massachusetts 02458, and our telephone number is (617) 964-8389.

Our principal external growth strategy is to expand our investments in high quality hotels which generate returns to us that exceed our operating and capital costs. Our principal internal growth strategy is to participate through percentage returns and rents in increases in total sales (including gross revenues from room rentals, food and beverage sales and other services) at our hotels, and, under some of our operating agreements, increases in the operating income of our hotels.

Our investment, financing and disposition policies and business strategies are established by our board of trustees and may be changed by our board of trustees at any time without shareholder approval.

As of December 31, 2005, our hotels are operated as Courtyard by Marriott^®, Candlewood Suites^®, Staybridge Suites^®, Residence Inn by Marriott^®, AmeriSuites^®, InterContinental Hotels & Resorts^®, Homestead Studio Suites^®, Crowne Plaza Hotels & Resorts^®, Marriott Hotels and Resorts^®, Radisson^® Hotels & Resorts, TownePlace Suites by Marriott^®, Country Inns & Suites by Carlson^®, Holiday Inn Hotels & Resorts^®, Park Plaza^® Hotels & Resorts, or SpringHill Suites by Marriott^®. The average age of our hotels was approximately 10.8 years at December 31, 2005.

Courtyard by Marriott^® hotels are designed to attract both business and leisure travelers. A typical Courtyard by Marriott^® hotel has 145 guest rooms. Most Courtyard by Marriott^® hotels are situated on well landscaped grounds and typically are built with a courtyard containing a patio, pool and socializing area that may be enclosed depending upon location. Many of these hotels have lounges, meeting rooms, an exercise room, a guest laundry and a restaurant. Generally, the guest rooms are similar in size and furnishings to guest rooms in full service Marriott^® hotels. In addition, many of the same amenities as would be available in full service Marriott^® hotels are available in Courtyard by Marriott^® hotels, except that restaurants may be open only for breakfast or serve limited menus, room service may not be available and meeting and function rooms are limited in size and number. According to Marriott International, Inc., or Marriott, as of December 2005, 692 Courtyard by Marriott^® hotels were open and operating in the United States and internationally. We believe that the Courtyard by Marriott^® brand is a leading brand in the upscale, limited service segment of the United States hotel industry. We have invested a total of $818 million in 71 Courtyard by Marriott^® hotels with a total of 10,280 rooms.

Candlewood Suites^® hotels are mid-priced extended stay hotels which offer studio and one-bedroom suites designed for business travelers expecting to stay five or more nights. Candlewood Suites^® hotels compete in the mid-priced extended stay segment of the lodging industry. Each Candlewood Suites^® suite contains a fully equipped kitchen area, a combination living and work area and a sleeping area. The kitchen includes a full size microwave, full size refrigerator, stove, dishwasher and coffee maker. The living area contains a convertible sofa or recliner, 25 inch television, videocassette and/or DVD player and compact disc player. The work area includes a large desk and executive chair, free high speed internet access, two phone lines, voice mail and a speaker phone. Each Candlewood Suites^® suite contains a king size bed. Other amenities offered at each Candlewood Suites^® hotel include a fitness center, free guest laundry facilities and a Candlewood Cupboard^® area where guests can purchase light meals, snacks and other refreshments. According to InterContinental Hotels Group plc, or InterContintental, the owner of the Candlewood Suites^® brand, there were 112 Candlewood Suites^® hotels open and operating across the United States as of December 2005. We have invested $590 million in 76 Candlewood Suites^® hotels with a total of 9,220 suites.

Staybridge Suites^® hotels offer residential style studio, one-bedroom and two bedroom suites for business, governmental and family travelers. Each suite offers a fully equipped kitchen and a work area with an oversized desk, two line phones, an ergonomically designed chair and high speed internet access. Other amenities include free breakfast buffet, on site convenience store, fitness center, 24 hour business center and convenience store. According

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to InterContinental, the owner of the Staybridge Suites^® brand, there were 87 Staybridge Suites^® hotels open and operating in the United States and internationally as of December 2005. We have invested a total of $443 million in 32 Staybridge Suites^® hotels with a total of 3,957 suites.

Residence Inn by Marriott^® hotels are designed to attract business, governmental and family travelers who stay several consecutive nights. Residence Inn by Marriott^® hotels generally have between 80 and 130 studio, one bedroom and two bedroom suites. Most Residence Inn by Marriott^® hotels are designed as residential style buildings with landscaped walkways, courtyards and recreational areas. Residence Inn by Marriott^® hotels do not have restaurants. All offer complimentary continental breakfast and a complimentary evening hospitality hour. In addition, each suite contains a fully equipped kitchen and many have fireplaces. Most Residence Inn by Marriott^® hotels also have swimming pools, exercise rooms, sports courts and guest laundries. According to Marriott, as of December 2005, 490 Residence Inn by Marriott^® hotels were open and operating in the United States, Mexico and Canada. We believe that the Residence Inn by Marriott^® brand is a leading brand in the extended stay segment of the United States hotel industry. We have invested a total of $431 million in 37 Residence Inn by Marriott^® hotels with a total of 4,695 suites.

AmeriSuites^® hotels are all suite hotels designed to attract value oriented business travelers. AmeriSuites^® hotels compete in the all suite segment of the lodging industry. Global Hyatt Corporation, or Hyatt, acquired the AmeriSuites^® brand in January 2005. In August 2005, Hyatt announced a plan for all qualifying AmeriSuites^® hotels to be rebranded under the new upscale Hyatt Place^TM brand. In connection with the rebranding, our AmeriSuites^® will be renovated to incorporate the new interior and exterior design of the Hyatt Place^TM brand. Each renovated Hyatt Place^TM hotel room will include upgraded bedding, a wet bar, granite counters, a sectional sofa and a media center with a 42 inch high definition plasma television. We expect the renovation of our AmeriSuites^® hotels to begin during April 2006. According to Hyatt, there were 145 AmeriSuites^® hotels open and operating across the United States as of December 2005. We have invested $243 million in 24 AmeriSuites^® hotels with a total of 2,929 suites.

InterContinental Hotels & Resorts^® hotels blend consistent global standards with the distinctive cultural features of their locations in an effort to deliver a truly memorable guest experience. Our InterContinental Hotels & Resorts^® contain between 189 and 485 rooms. InterContinental Hotels & Resorts^® offer an exceptional service for business and leisure guests seeking a luxury hotel experience. Amenities include a wide range of personal and business services in addition to restaurants, cocktail lounges, pools, saunas and health/fitness centers. According to InterContinental, there were 137 InterContinental Hotels & Resorts^® hotels open worldwide as of December 2005. We have invested a total of $226 million in four InterContinental Hotels & Resorts^® with a total of 1,286 rooms.

Homestead Studio Suites^® hotels are extended stay hotels designed for value oriented business travelers. Each Homestead Studio Suites^® room features a kitchen with a full size refrigerator, stovetop, microwave, coffee maker, utensils and dishes. A work area is provided with a well lit desktop and a computer data port. Complimentary local phone calls, fax service, copy service, personalized voicemail and wireless high speed internet access are also available to guests. On site laundry and other personal care items are available. According to BRE / Homestead Village LLC, or Homestead, there were 132 Homestead Studio Suites^® hotels open in the United States as of December 2005. We have invested $145 million in 18 Homestead Studio Suites^® hotels with a total of 2,399 suites.

Crowne Plaza Hotels & Resorts^® is InterContinental’s upscale brand targeted at the business guest seeking upscale accommodations at a good value. Crowne Plaza Hotels & Resorts^® have a particular focus on meeting accommodations and related services. Our Crowne Plaza Hotels & Resorts^® contain between 340 and 613 rooms. With its wide variety of premium services and amenities, including fully-appointed guest rooms with ample work space, full complement of business services, excellent dining choices, quality fitness facilities and comprehensive meeting capabilities, Crowne Plaza Hotels & Resorts^® are designed to exceed guest expectations by providing “the right room, the right technology and the right service”. According to InterContinental, there were 235 Crowne Plaza Hotels & Resorts^® open and operating worldwide as of December 2005. We have invested a total of $138 million in four Crowne Plaza Hotels & Resorts^® with a total of 1,700 rooms.

Marriott Hotels and Resorts^® are renowned for the consistent quality of their physical appearances and the high quality of their staff. Our Marriott Hotels and Resorts^® contain between 356 and 601 rooms. Our Marriott Hotels and Resorts^® have between 17,000 to 50,000 square feet of meeting and banquet space. Amenities include a wide

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range of personal and business services in addition to a choice of restaurants, cocktail lounges, concierge floors, pools, saunas, and health/fitness centers. According to Marriott, there were 507 Marriott Hotels and Resorts^® open worldwide as of December 2005. We have invested $113 million in three Marriott Hotels and Resorts^® with a total of 1,356 guest rooms.

Radisson^® Hotels & Resorts is a leading full service hotel brand. Our Radisson^® Hotels & Resorts hotels contain between 180 and 381 rooms. Four of our hotels were rebranded as Radisson^® Hotels & Resorts during 2005 and are currently undergoing renovations, which are expected to be completed by June 2006. Amenities and services include Sleep Number^® beds, large desks, free high speed internet access, room service and access to 24 hour printing, telecopy and mail and package services. The meeting facilities at our Radisson^® Hotels & Resorts generally can accommodate groups of between 10 and 600 people in a flexible meeting room design with audiovisual equipment. Each of our Radisson^® Hotels & Resorts hotels generally also has a lobby lounge, a swimming pool, exercise facilities and one or more restaurants. According to Carlson Hotels Worldwide, or Carlson, the owner of the Radisson^® Hotels & Resorts brand, there were 418 Radisson^® Hotels & Resorts open and operating worldwide as of December 2005. We have invested a total of $100 million in four Radisson^® Hotels & Resorts with a total of 975 rooms.

TownePlace Suites by Marriott^® are extended stay hotels offering studio, one bedroom and two bedroom suites for business and family travelers. TownePlace Suites by Marriott^® compete in the mid-priced extended stay segment of the lodging industry. Each suite offers a fully equipped kitchen, a bedroom and separate living and work areas. Other amenities offered include voice mail, free high speed internet access, on site business services, guest laundry facilities and a fitness center. According to Marriott, there were 122 TownePlace Suites by Marriott^® open worldwide as of December 2005. We have invested $102 million in 12 TownePlace Suites by Marriott^® with a total of 1,331 suites.

Country Inns & Suites by Carlson^® is a mid-tier lodging chain. Our Country Inns & Suites by Carlson^® hotels contain between 84 and 180 rooms. Four of our hotels were rebranded as Country Inns & Suites by Carlson^® during 2005 and are currently undergoing renovations which are expected to be completed by June 2006. Amenities and services at these hotels include large desks, free breakfast, weekday morning paper and high speed internet access. The meeting facilities at our Country Inns & Suites by Carlson^® hotels generally can accommodate groups of between 10 and 200 people in a flexible meeting room design with audiovisual equipment. Most of our Country Inns & Suites by Carlson^® hotels also feature a lobby with a fireplace, swimming pool, exercise facilities, fax and copy service and a restaurant and lounge. According to Carlson there were 379 Country Inns & Suites by Carlson^® open and operating worldwide as of December 2005. We have invested a total of $69 million in five Country Inns & Suites by Carlson^® with a total of 753 rooms.

Holiday Inn Hotels & Resorts^® combine all the services and amenities of a full service hotel in a contemporary style offered at a value price for either business or leisure travelers. Our Holiday Inn Hotel^® and our two Holiday Inn Select^® hotels contain between 190 and 264 rooms. Amenities and services generally available at these hotels include a work desk, phone with voicemail, free high speed internet access, a business center with internet access, copy and fax service, in room coffee or tea service, a refrigerator and designer bath amenities. The meeting facilities at our Holiday Inn Hotels^® generally can accommodate groups of between 18 and 280 people in a flexible meeting room design with audiovisual equipment and catering options. These hotels also offer a swimming pool, exercise facilities, guest self-service laundry, a lobby lounge and restaurant. According to InterContinental, the owner of the Holiday Inn Hotels & Resorts^® brand, there were 1,435 Holiday Inn Hotels^® open and operating worldwide as of December 2005. We have invested a total of $33 million in three Holiday Inn Hotels^® with a total of 697 rooms.

Park Plaza^® Hotels & Resorts is in the mid price segment of the full service hotel category. Three of our hotels were rebranded as Park Plaza^® Hotels & Resorts during 2005 and are currently undergoing renovations which are expected to be completed by May 2006. Our Park Plaza^® Hotels & Resorts contain between 159 and 209 rooms. Amenities and services generally available at these hotels include large desks, free high speed internet access, room service and access to 24 hour telecopy and mail and package services. The meeting facilities at our Park Plaza^® Hotels & Resorts generally can accommodate groups of between 10 and 400 people in a flexible meeting room design with audiovisual equipment. Our Park Plaza^® Hotels & Resorts hotels also feature a lobby lounge, a

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swimming pool, exercise facilities and a restaurant. According to Carlson, the owner of the Park Plaza^® Hotels & Resorts brand, there were 37 Park Plaza^® Hotels & Resorts open and operating as of December 2005. We have invested a total of $27 million in three Park Plaza^® Hotels & Resorts with a total of 534 rooms.

SpringHill Suites by Marriott^® are all suites hotels designed to attract value conscious business and family travelers. SpringHill Suites by Marriott^® compete in the mid-priced all suite segment of the lodging industry. Each suite offers separate sleeping, living and work areas, a mini-refrigerator, a microwave and coffee service. Other amenities offered include a pull out sofa bed, complimentary breakfast buffet, weekday newspaper, two line phones, free high speed internet access and voice mail, on site business services, guest laundry facilities and a fitness center. According to Marriott, there were 137 SpringHill Suites by Marriott^® open as of December 2005. We have invested $21 million in two SpringHill Suites by Marriott^® with a total of 264 suites.

PRINCIPAL MANAGEMENT AGREEMENT OR LEASE FEATURES

As of December 31, 2005, all of our hotels are operated by unrelated third parties. Each hotel we own is operated as part of a combination of hotels under ten agreements, as described below. The principal features of the management agreements and leases for our 298 hotels are as follows:

•Minimum Returns or Minimum Rent. All of our agreements require our managers or tenants to pay to us fixed minimum returns or minimum rent.

•Additional Returns or Rent. Most of our agreements require percentage returns or rent equal to between 5% and 10% of increases in gross hotel revenues over threshold amounts. In addition, certain of our agreements provide for additional returns to us based on increases in hotel operating income.

•Long Terms. Our management agreements and leases are generally entered for initial terms of 15 years or more. All of the management agreements and leases for our hotels expire after 2010. The weighted average term remaining for our hotel agreements (weighted by our investment) is 16.5 years as of December 31, 2005.

•Pooled Agreements. Each of our hotels is part of a combination of hotels. The manager’s or tenant’s obligations to us with respect to each hotel in a combination are subject to cross default with the obligations with respect to all the other hotels in the same combination. The smallest combination includes 12 hotels with 2,262 rooms in which we have invested $196 million; the largest combination includes 76 hotels with 9,220 rooms in which we have invested $590 million.

•Geographic Diversification. Each combination of hotels is geographically diversified. In addition, our hotels are located in the vicinity of major demand generators such as large suburban office parks, airports, medical or educational facilities or major tourist attractions.

•All or None Renewals. All manager or tenant renewal options for each combination of our hotels may only be exercised on an all or none basis and not for separate hotels.

•FF&E Reserves. Generally our agreements require the deposit of 5 to 6% of gross hotel revenues into escrows to fund periodic renovations, or FF&E reserve, in addition to minimum returns or rents. For recently built or renovated hotels, this requirement may be deferred for the first few years of the agreement.

•Security Features. Each management agreement or lease includes various terms intended to secure the payments to us, including some or all of the following: cash security deposits which we receive but do not escrow; subordination of management fees payable to the hotel operator to some or all of our return or rent and full or limited guarantees from the manager’s or tenant’s parent company. As of December 31, 2005, six of our ten hotel combination agreements, including 173 hotels, have minimum return or minimum rent payable to us which are subject to full or limited guarantees. These hotels represent 58% of our total investments, at cost.

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RECENT ACQUISITIONS

On January 6, 2006, we purchased the Harbor Court Complex in the Inner Harbor area of Baltimore, Maryland for $78 million. The Harbor Court Complex is a mixed use development comprised of the five star, five diamond Harbor Court Hotel, a 72,042 square foot office building, and a 530 space seven story parking garage. The hotel has 195 guest rooms, including 22 suites, 8,000 square feet of meeting space, and a roof top fitness center that includes a tennis court, squash court, indoor pool, aerobics center and spa therapy rooms. Simultaneously with this purchase, we entered into an agreement with InterContinental to manage the Harbor Court Hotel under its InterContinental Hotels & Resorts^® brand. This hotel was added to an existing agreement with InterContinental under which it manages thirteen other hotels owned by us through 2029. We have also entered into a management agreement with our manager, Reit Management & Research LLC, or RMR, to operate the office building and an agreement with an unaffiliated third party to manage the parking garage. The transaction is more fully described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.

On January 25, 2006, we agreed to purchase nine hotels for $196 million. The hotels include five full service Crowne Plaza^® hotels, one full service Holiday Inn Select^® hotel, two Staybridge Suites^® hotels and one Holiday Inn SunSpree Resort^® hotel and have a total of 2,712 rooms/suites and approximately 68,000 square feet of meeting space. The hotels are located in three states in the United States and the Holiday Inn SunSpree Resort^® hotel is located in Montego Bay, Jamaica. On January 25, 2006, we completed the acquisition of eight of the nine hotels with an effective date of January 20, 2006. Simultaneous with this closing, we entered into a long term management agreement with InterContinental for these hotels. The purchase of the 524 room Holiday Inn SunSpree Resort^® hotel for approximately $30 million was delayed pending Jamaican tax and regulatory approvals, and is expected to close later in 2006. Circumstances may delay this purchase for an extended period or prevent its occurring. Simultaneous with that purchase we will enter into a long term lease with InterContinental for that hotel. The transaction is more fully described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K.

INVESTMENT AND OPERATING POLICIES

We provide capital to hotel owners and operators who wish to divest their properties while remaining in the hotel business. Many other public hotel REITs seek to control the operations of hotels in which they invest and generally design their management agreements or leases to capture substantially all net operating revenues from their hotels. Our agreements with our unaffiliated operators and tenants are designed with the expectation that, over their terms, net operating revenues from our hotels will exceed minimum amounts due to us. We believe that this difference in operating philosophy may afford us a competitive advantage over other hotel REITs in finding high quality hotel investment opportunities on attractive terms and increase the dependability of our cash flows used to pay distributions.

Our investment objectives include increasing cash flow from operations from dependable and diverse sources in order to increase per share distributions. To achieve these objectives, we seek to operate as follows: maintain a strong capital base of shareholders’ equity; invest in high quality properties operated by unaffiliated hotel operating companies; use moderate debt leverage to fund additional investments which increase cash flow from operations because of positive spreads between our cost of investment capital and investment yields; structure investments which generate a minimum return and provide an opportunity to participate in operating growth at our hotels; when market conditions permit, refinance debt with additional equity or long term debt; and pursue diversification so that our cash flow from operations is received from diverse properties and operators.

In order to benefit from potential property appreciation, we prefer to own properties rather than make mortgage investments. We may invest in real estate joint ventures if we conclude that we may benefit from the participation of co-venturers or that the opportunity to participate in the investment is contingent on the use of a joint venture structure. We may invest in participating, convertible or other types of mortgages if we conclude that we may benefit from the cash flow or appreciation in the value of the mortgaged property. Convertible mortgages are similar to equity participation because they permit lenders to either participate in increasing revenues from the property or convert some or all of that mortgage into equity ownership interests. At December 31, 2005, we owned no convertible mortgages or joint venture interests.

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We may not achieve some or all of our investment objectives.

Because we are a REIT, generally, we may not operate hotels. We or our tenants have entered into arrangements for operation of our hotels. As described elsewhere in this Annual Report on Form 10-K, tax law changes known as the REIT Modernization Act, or the RMA, were enacted and became effective January 1, 2001. The RMA, among other things, allows a REIT to lease hotels to a taxable REIT subsidiary if the hotel is managed by an independent third party. As of December 31, 2005, 189 of our hotels are leased to our taxable REIT subsidiaries and managed by independent third parties. Any income realized by a taxable REIT subsidiary in excess of the rent paid to us by the subsidiary will be subject to income tax at customary corporate rates. As, and if, the financial performance of the hotels operated for the account of our taxable REIT subsidiaries improves, these taxes may become material, but the anticipated taxes are not material to our consolidated financial results at this time.

ACQUISITION POLICIES

We intend to pursue growth through the acquisition of additional hotels. Generally, we prefer to purchase multiple hotels in one transaction because we believe a single agreement, cross default covenants and all or none renewal rights for multiple hotels in diverse locations enhance the credit characteristics and the security of our investments. In implementing our acquisition strategy, we consider a range of factors relating to proposed hotel purchases including: (i) historical and projected cash flows; (ii) the competitive market environment and the current or potential market position of each hotel; (iii) the availability of a qualified operator or lessee; (iv) the financial strength of the proposed operator or lessee; (v) the amount and type of financial support available from the proposed operator or lessee; (vi) the hotel’s design, physical condition and age; (vii) the estimated replacement cost and proposed acquisition price of the hotel; (viii) the price segment in which the hotel is operated; (ix) the reputation of the particular hotel management organization, if any, with which the hotel is or may become affiliated; (x) the level of services and amenities offered at the hotel; (xi) the proposed management agreement or lease terms; and (xii) the hotel brand under which the hotel operates or is expected to operate. In determining the competitive position of a hotel, we examine the proximity of the hotel to business, retail, academic and tourist attractions and transportation routes, the number and characteristics of competitive hotels within the hotel’s market area and the existence of barriers to entry within that market, including site availability and zoning restrictions. While we have historically focused on the acquisition of upscale limited service, extended stay and full service hotel properties, we consider acquisitions in all segments of the hospitality industry. An important part of our acquisition strategy is to identify and select qualified, experienced and financially stable hotel operators.

Whenever we purchase an individual hotel or a small number of hotels we attempt to arrange for these hotels to be added to agreements covering and operated in combination with hotels we already own.

We have no policies which specifically limit the percentage of our assets which may be invested in any individual property, in any one type of property, in properties operated by or leased to any one entity or in properties operated by or leased to an affiliated group of entities.

In the past, we have considered the possibility of entering mergers or strategic combinations with other companies. No such mergers or strategic combinations are under active negotiation at this time. However, we may undertake such negotiations in the future. A principal goal of any such transaction may be to diversify our revenue sources.

DISPOSITION POLICIES

In the past we have occasionally sold a hotel or exchanged hotels which we own for different hotels. Although we may do so, we have no current intention to dispose of any of our presently owned hotels. We currently anticipate that disposition decisions, if any, will be based on factors including but not limited to the following: (i) potential opportunities to increase revenues and property values by reinvesting sale proceeds; (ii) the proposed sale price; (iii) the strategic fit of the hotel with the rest of our portfolio; (iv) our operator’s or tenant’s desire to cease operation of the hotel; and (v) the existence of alternative sources, uses or needs for capital.

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FINANCING POLICIES

Although there are no limitations in our organizational documents on the amount of indebtedness we may incur, our $750 million unsecured revolving credit facility and our senior note indenture and its supplements contain financial covenants which, among other things, restrict our ability to incur indebtedness and require us to maintain financial ratios and a minimum net worth. We currently intend to pursue our growth strategies while maintaining debt that is less than 50% of our total capitalization. We may from time to time re-evaluate and modify our financing policies in light of then current economic conditions, relative availability and costs of debt and equity capital, market values of properties, growth and acquisition opportunities and other factors, and we may increase or decrease our ratio of debt to total capitalization accordingly.

Our board of trustees may determine to obtain a replacement for our current credit facility or to seek additional capital through equity offerings, debt financings, or retention of cash flows in excess of distributions to shareholders or a combination of these methods. Only one of our properties is encumbered by a mortgage. To the extent that our board of trustees decides to obtain additional debt financing, we may do so on an unsecured basis or a secured basis. We may seek to obtain other lines of credit or to issue securities senior to our common and/or preferred shares, including preferred shares of beneficial interest and debt securities, either of which may be convertible into common shares or be accompanied by warrants to purchase common shares, or to engage in transactions which may involve a sale or other conveyance of hotels to subsidiaries or to unaffiliated entities. We may finance acquisitions through an exchange of properties or through the issuance of additional common shares or other securities. The proceeds from any of our financings may be used to pay distributions, to provide working capital, to refinance existing indebtedness or to finance acquisitions and expansions of existing or new properties.

Manager. Our day to day operations are conducted by RMR. RMR originates and presents investment opportunities to our board of trustees and provides administrative services to us. RMR is a Delaware limited liability company, whose majority owner is Barry Portnoy, one of our managing trustees. The remainder of RMR is owned by Adam Portnoy, Barry Portnoy’s son, who is also an executive officer of RMR and Executive Vice President of HRPT Properties Trust, or HRPT. RMR has a principal place of business at 400 Centre Street, Newton, Massachusetts 02458; and its telephone number is (617) 928-1300. RMR acts as manager to HRPT, a New York Stock Exchange, or NYSE, listed real estate company which owns office buildings and is the holder of 4,000,000 of our common shares. The directors of RMR are Gerard M. Martin, another of our managing trustees, Barry M. Portnoy and David J. Hegarty. The executive officers of RMR are David J. Hegarty, President and Secretary; John G. Murray, Executive Vice President; Evrett W. Benton, Vice President; Ethan S. Bornstein, Vice President; Jennifer B. Clark, Vice President; John R. Hoadley, Vice President; Mark L. Kleifges, Vice President; David M. Lepore, Vice President; Bruce J. Mackey Jr., Vice President; John A. Mannix, Vice President; Thomas M. O’Brien, Vice President; John C. Popeo, Vice President and Treasurer; and Adam D. Portnoy, Vice President. Messrs. Murray, Kleifges and Bornstein are also our officers. Other officers of RMR also serve as officers of other companies to which RMR provides management services, including HRPT.

Employees. We have no employees. Services which would otherwise be provided by employees are provided by RMR and by our managing trustees and officers. As of March 10, 2006, RMR had approximately 400 full time employees.

Competition. The hotel industry is highly competitive. Generally our hotels are located in areas that include other hotels. Increases in the number of hotels in a particular area could have a material adverse effect on the occupancy and daily room rates at our hotels located in that area. Agreements with the operators of our hotels sometimes restrict the right of each operator and its affiliates for limited periods of time to own, build, operate, franchise or manage other hotels of the same brand within various specified areas around our hotels. Under these agreements neither the operators nor their affiliates are restricted from operating other brands of hotels in the market areas of any of our hotels, and after such limited period of time, the operators and their affiliates may also compete with our hotels by opening, managing or franchising additional hotels under the same brand name in direct competition with our hotels.

We expect to compete for hotel acquisition and financing opportunities with entities which may have substantially greater financial resources than us, including, without limitation, other REITs, hotel operating companies, banks, insurance companies, pension plans and public and private partnerships. These entities may be able to accept more risk than we can prudently manage, including risks with respect to the creditworthiness of hotel

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operators. Such competition may reduce the number of suitable hotel acquisition or financing opportunities available to us or increase the bargaining power of hotel owners seeking to sell or finance their properties.

Environmental Matters. Under various laws, owners of real estate may be required to investigate and clean up hazardous substances present at their properties, and may be held liable for property damage or personal injuries that result from such hazardous substances. These laws also expose us to the possibility that we become liable to reimburse the government for damages and costs it incurs in connection with the hazardous substances. We reviewed environmental surveys of the hotels we own prior to their purchase. Based upon those surveys we do not believe that any of our properties are subject to material environmental contamination. However, no assurances can be given that environmental conditions for which we would be liable are not present in our properties or that costs we incur to remediate contamination will not have a material adverse effect on our business or financial condition.

Internet Website. Our internet website address is www.hptreit.com. Copies of our governance guidelines, code of ethics and the charters of our audit, compensation and nominating and governance committees may be obtained free of charge by writing to our Secretary, Hospitality Properties Trust, 400 Centre Street, Newton, MA 02458 or at our website. We make available, free of charge, on our website, our Annual Reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, or the Exchange Act, as soon as reasonably practicable after these forms are filed with, or furnished to, the Securities and Exchange Commission, or the SEC. Any shareholder or other interested party who desires to communicate with our non-management trustees, individually or as a group, may do so by filling out a report on our website. Our board also provides a process for security holders to send communications to the entire board. Information about the process for sending communications to our board can be found on our website. Our website address is included several times in this Annual Report on Form 10-K as a textual reference only and the information in the website is not incorporated by reference into this Annual Report on Form 10-K.

Segment Information. We have one operating segment, hotel investments.

FEDERAL INCOME TAX CONSIDERATIONS

The following summary of federal income tax considerations is based on existing law, and is limited to investors who own our shares as investment assets rather than as inventory or as property used in a trade or business. The summary does not discuss the particular tax consequences that might be relevant to you if you are subject to special rules under federal income tax law, for example if you are:

•a bank, life insurance company, regulated investment company, or other financial institution;

•a broker or dealer in securities or foreign currency;

•a person who has a functional currency other than the U.S. dollar;

•a person who acquires our shares in connection with employment or other performance of services;

•a person subject to alternative minimum tax;

•a person who owns our shares as part of a straddle, hedging transaction, constructive sale transaction, constructive ownership transaction, or conversion transaction; or

•except as specifically described in the following summary, a tax-exempt entity or a foreign person.

The Internal Revenue Code sections that govern federal income tax qualification and treatment of a REIT and its shareholders are complex. This presentation is a summary of applicable Internal Revenue Code provisions, related rules and regulations and administrative and judicial interpretations, all of which are subject to change, possibly with retroactive effect. The American Jobs Creation Act of 2004, or the 2004 Act, which subsequently received technical corrections as part of the Gulf Opportunity Zone Act of 2005, made a number of significant changes to these provisions,

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some of which have retroactive effect; we have summarized these changes in more detail below. Future legislative, judicial, or administrative actions or decisions could also affect the accuracy of statements made in this summary. We have not received a ruling from the IRS with respect to any matter described in this summary,and we cannot assure you that the IRS or a court will agree with the statements made in this summary. In addition, this summary is not exhaustive of all possible tax consequences, and does not discuss any estate, gift, state, local, or foreign tax consequences. For all these reasons, we urge you and any prospective acquiror of our shares to consult with a tax advisor about the federal income tax and other tax consequences of the acquisition, ownership and disposition of our shares. Our intentions and beliefs described in this summary are based upon our understanding of applicable laws and regulations that are in effect as of the date of this Annual Report on Form 10-K. If new laws or regulations are enacted which impact us directly or indirectly, we may change our intentions or beliefs.

Your federal income tax consequences may differ depending on whether or not you are a “U.S. shareholder.” For purposes of this summary, a “U.S. shareholder” for federal income tax purposes is:

•a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under the federal income tax laws;

•an entity treated as a corporation or partnership for federal income tax purposes, that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia, unless otherwise provided by Treasury regulations;

•an estate the income of which is subject to federal income taxation regardless of its source; or

•a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust, or electing trusts in existence on August 20, 1996, to the extent provided in Treasury regulations;

whose status as a U.S. shareholder is not overridden by an applicable tax treaty. Conversely, a “non-U.S. shareholder” is a beneficial owner of our shares who is not a U.S. shareholder.

Taxation as a REIT

We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code, commencing with our taxable year ending December 31, 1995. Our REIT election, assuming continuing compliance with the then applicable qualification tests, continues in effect for subsequent taxable years. Although no assurance can be given, we believe that we are organized, have operated, and will continue to operate in a manner that qualifies us to be taxed under the Internal Revenue Code as a REIT.

As a REIT, we generally are not subject to federal income tax on our net income distributed as dividends to our shareholders. Distributions to our shareholders generally are included in their income as dividends to the extent of our current or accumulated earnings and profits. Our dividends are not generally entitled to the favorable 15% rate on qualified dividend income, but a portion of our dividends may be treated as capital gain dividends, all as explained below. No portion of any of our dividends is eligible for the dividends received deduction for corporate shareholders. Distributions in excess of current or accumulated earnings and profits generally are treated for federal income tax purposes as return of capital to the extent of a recipient shareholder’s basis in our shares, and will reduce this basis. Our current or accumulated earnings and profits are generally allocated first to distributions made on our preferred shares, and thereafter to distributions made on our common shares.

Our counsel, Sullivan & Worcester LLP, has opined that we have been organized and have qualified as a REIT under the Internal Revenue Code for our 1995 through 2005 taxable years, and that our current investments and plan of operation enable us to continue to meet the requirements for qualification and taxation as a REIT under the Internal Revenue Code. Our continued qualification and taxation as a REIT will depend upon our compliance with various qualification tests imposed under the Internal Revenue Code and summarized below. While we believe that we will satisfy these tests, our counsel has not reviewed and will not review compliance with these tests on a continuing basis. If we fail to qualify as a REIT, we will be subject to federal income taxation as if we were a C corporation and our

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shareholders will be taxed like shareholders of C corporations. In this event, we could be subject to significant tax liabilities, and the amount of cash available for distribution to our shareholders may be reduced or eliminated.

If we qualify as a REIT and meet the tests described below, we generally will not pay federal income tax on amounts we distribute to our shareholders. However, even if we qualify as a REIT, we may be subject to federal tax in the following circumstances:

•We will be taxed at regular corporate rates on any undistributed “real estate investment trust taxable income,” including our undistributed net capital gains.

•If our alternative minimum taxable income exceeds our taxable income, we may be subject to the corporate alternative minimum tax on our items of tax preference.

•If we have net income from the disposition of “foreclosure property” that is held primarily for sale to customers in the ordinary course of business or from other nonqualifying income from foreclosure property, we will be subject to tax on this income at the highest regular corporate rate, currently 35%.

•If we have net income from prohibited transactions, including dispositions of inventory or property held primarily for sale to customers in the ordinary course of business other than foreclosure property, we will be subject to tax on this income at a 100% rate.

•If we fail to satisfy the 75% gross income test or the 95% gross income test discussed below, but nonetheless maintain our qualification as a REIT, we will be subject to tax at a 100% rate on the greater of the amount by which we fail the 75% or the 95% test, with adjustments, multiplied by a fraction intended to reflect our profitability.

•If we fail to distribute for any calendar year at least the sum of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain net income for that year, and any undistributed taxable income from prior periods, we will be subject to a 4% excise tax on the excess of the required distribution over the amounts actually distributed.

•If we acquire an asset from a corporation in a transaction in which our basis in the asset is determined by reference to the basis of the asset in the hands of a present or former C corporation, and if we subsequently recognize gain on the disposition of this asset during the ten year period beginning on the date on which the asset ceased to be owned by the C corporation, then we will pay tax at the highest regular corporate tax rate, which is currently 35%, on the lesser of the excess of the fair market value of the asset over the C corporation’s basis in the asset on the date the asset ceased to be owned by the C corporation, or the gain we recognize in the disposition.

•If we acquire a corporation, to preserve our status as a REIT we must generally distribute all of the C corporation earnings and profits inherited in that acquisition, if any, not later than the end of the taxable year of the acquisition. However, if we fail to do so, relief provisions would allow us to maintain our status as a REIT provided we distribute any subsequently discovered C corporation earnings and profits and pay an interest charge in respect of the period of delayed distribution.

•As summarized below, REITs are permitted within limits to own stock and securities of a “taxable REIT subsidiary.” A taxable REIT subsidiary is separately taxed on its net income as a C corporation, and is subject to limitations on the deductibility of interest expense paid to its REIT parent. In addition, its REIT parent is subject to a 100% tax on the difference between amounts charged and redetermined rents and deductions, including excess interest.

•If and to the extent we invest in properties in foreign jurisdictions, our income from those properties will generally be subject to tax in those jurisdictions. In 2005, we acquired hotels in Canada and Puerto Rico, and we are currently under contract to acquire a hotel in Jamaica. Our profits from properties outside of the United States will generally be subject to tax in the local jurisdictions. Through structuring and obtaining

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available tax exemptions, we expect to minimize the Canadian, Puerto Rican and Jamaican income taxes we have to pay, but there can be no assurance that these existing structures and exemptions will be available to us in the future to minimize taxes. If we continue to operate as we do, then we will distribute our taxable income to our shareholders each year and we will generally not pay federal income tax. As a result, we cannot recover the cost of foreign income taxes imposed on our foreign investments by claiming foreign tax credits against our federal income tax liability. Also, we cannot pass through to our shareholders any foreign tax credits.

If we fail to qualify or elect not to qualify as a REIT, we will be subject to federal income tax in the same manner as a C corporation. Distributions to our shareholders if we do not qualify as a REIT will not be deductible by us nor will distributions be required under the Internal Revenue Code. In that event, distributions to our shareholders will generally be taxable as ordinary dividends potentially eligible for the 15% income tax rate discussed below in “Taxation of U.S. Shareholders” and, subject to limitations in the Internal Revenue Code, will be eligible for the dividends received deduction for corporate shareholders. Also, we will generally be disqualified from qualification as a REIT for the four taxable years following disqualification. If we do not qualify as a REIT for even one year, this could result in reduction or elimination of distributions to our shareholders, or in our incurring substantial indebtedness or liquidating substantial investments in order to pay the resulting corporate-level taxes. For our 2005 taxable year and beyond, the 2004 Act provides certain relief provision under which we might avoid automatically ceasing to be a REIT for failure to meet certain REIT requirements, all as discussed in more detail below.

REIT Qualification Requirements

General Requirements. Section 856(a) of the Internal Revenue Code defines a REIT as a corporation, trust or association:

(1)that is managed by one or more trustees or directors;

(2)the beneficial ownership of which is evidenced by transferable shares or by transferable certificates of beneficial interest;

(3)that would be taxable, but for Sections 856 through 859 of the Internal Revenue Code, as a C corporation;

(4)that is not a financial institution or an insurance company subject to special provisions of the Internal Revenue Code;

(5)the beneficial ownership of which is held by 100 or more persons;

(6)that is not “closely held” as defined under the personal holding company stock ownership test, as described below; and

(7)that meets other tests regarding income, assets and distributions, all as described below.

Section 856(b) of the Internal Revenue Code provides that conditions (1) through (4) must be met during the entire taxable year and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a pro rata part of a taxable year of less than 12 months. Section 856(h)(2) of the Internal Revenue Code provides that neither condition (5) nor (6) need be met for our first taxable year as a REIT. We believe that we have met conditions (1) through (7) during each of the requisite periods ending on or before December 31, 2005, and that we can continue to meet these conditions in future taxable years. There can, however, be no assurance in this regard.

By reason of condition (6), we will fail to qualify as a REIT for a taxable year if at any time during the last half of a year more than 50% in value of our outstanding shares is owned directly or indirectly by five or fewer individuals. To help comply with condition (6), our declaration of trust restricts transfers of our shares. In addition, if we comply with applicable Treasury regulations to ascertain the ownership of our shares and do not know, or by exercising reasonable diligence would not have known, that we failed condition (6), then we will be treated as having met condition

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(6). However, our failure to comply with these regulations for ascertaining ownership may result in a penalty of $25,000, or $50,000 for intentional violations. Accordingly, we intend to comply with these regulations, and to request annually from record holders of significant percentages of our shares information regarding the ownership of our shares. Under our declaration of trust, our shareholders are required to respond to these requests for information.

For purposes of condition (6), REIT shares held by a pension trust are treated as held directly by the pension trust’s beneficiaries in proportion to their actuarial interests in the pension trust. Consequently, five or fewer pension trusts could own more than 50% of the interests in an entity without jeopardizing that entity’s federal income tax qualification as a REIT. However, as discussed below, if a REIT is a “pension-held REIT,” each pension trust owning more than 10% of the REIT’s shares by value generally may be taxed on a portion of the dividends it receives from the REIT.

The 2004 Act provides that we will not automatically fail to be a REIT if we do not meet conditions (1) through (6), provided we can establish reasonable cause for any such failure. Each such excused failure will result in the imposition of a $50,000 penalty instead of REIT disqualification. It is impossible to state whether in all circumstances we would be entitled to the benefit of this relief provision. This relief provision applies to any failure of the applicable conditions, even if the failure first occurred in a prior taxable year, as long as each of the requirements of the relief provision is satisfied after October 22, 2004.

Our Wholly-Owned Subsidiaries and Our Investments through Partnerships. Except in respect of taxable REIT subsidiaries as discussed below, Section 856(i) of the Internal Revenue Code provides that any corporation, 100% of whose stock is held by a REIT, is a qualified REIT subsidiary and shall not be treated as a separate corporation. The assets, liabilities and items of income, deduction and credit of a qualified REIT subsidiary are treated as the REIT’s. We believe that each of our direct and indirect wholly-owned subsidiaries, other than the taxable REIT subsidiaries discussed below, will either be a qualified REIT subsidiary within the meaning of Section 856(i) of the Internal Revenue Code, or a noncorporate entity that for federal income tax purposes is not treated as separate from its owner under regulations issued under Section 7701 of the Internal Revenue Code. Thus, except for the taxable REIT subsidiaries discussed below, in applying all the federal income tax REIT qualification requirements described in this summary, all assets, liabilities and items of income, deduction and credit of our direct and indirect wholly-owned subsidiaries are treated as ours.

We have invested and may invest in real estate through one or more limited or general partnerships or limited liability companies that are treated as partnerships for federal income tax purposes. In the case of a REIT that is a partner in a partnership, regulations under the Internal Revenue Code provide that, for purposes of the REIT qualification requirements regarding income and assets discussed below, the REIT is deemed to own its proportionate share of the assets of the partnership corresponding to the REIT’s proportionate capital interest in the partnership and is deemed to be entitled to the income of the partnership attributable to this proportionate share. In addition, for these purposes, the character of the assets and gross income of the partnership generally retain the same character in the hands of the REIT. Accordingly, our proportionate share of the assets, liabilities, and items of income of each partnership in which we are a partner is treated as ours for purposes of the income tests and asset tests discussed below. In contrast, for purposes of the distribution requirement discussed below, we must take into account as a partner our share of the partnership’s income as determined under the general federal income tax rules governing partners and partnerships under Sections 701 through 777 of the Internal Revenue Code.

Taxable REIT Subsidiaries. We are permitted to own any or all of the securities of a “taxable REIT subsidiary” as defined in Section 856(l) of the Internal Revenue Code, provided that no more than 20% of our assets, at the close of each quarter, is comprised of our investments in the stock or securities of our taxable REIT subsidiaries. Among other requirements, a taxable REIT subsidiary must:

(1) be a non-REIT corporation for federal income tax purposes in which we directly or indirectly own shares;

(2) join with us in making a taxable REIT subsidiary election;

(3) not directly or indirectly operate or manage a lodging facility or a health care facility; and

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(4) not directly or indirectly provide to any person, under a franchise, license, or otherwise, rights to any brand name under which any lodging facility or health care facility is operated, except that in limited circumstances a subfranchise, sublicense or similar right can be granted to an independent contractor to operate or manage a lodging facility.

In addition, a corporation other than a REIT in which a taxable REIT subsidiary directly or indirectly owns more than 35% of the voting power or value will automatically be treated as a taxable REIT subsidiary. Subject to the discussion below, we believe that we and each of our taxable REIT subsidiaries have complied with, and will continue to comply with, the requirements for taxable REIT subsidiary status during all times each subsidiary’s taxable REIT subsidiary election remains in effect, and we believe that the same will be true for any taxable REIT subsidiary that we later form or acquire.

Our ownership of stock and securities in taxable REIT subsidiaries is exempt from the 10% and 5% REIT asset tests discussed below. Also, as discussed below, taxable REIT subsidiaries can perform services for our tenants without disqualifying the rents we receive from those tenants under the 75% or 95% gross income tests discussed below. Moreover, because taxable REIT subsidiaries are taxed as C corporations that are separate from us, their assets, liabilities and items of income, deduction and credit are not generally imputed to us for purposes of the REIT qualification requirements described in this summary. Therefore, taxable REIT subsidiaries can generally undertake third-party management and development activities and activities not related to real estate. Finally, while a REIT is generally limited in its ability to earn qualifying rental income from a taxable REIT subsidiary, a REIT can earn qualifying rental income from the lease of a qualified lodging facility to a taxable REIT subsidiary if an eligible independent contractor operates the facility, as discussed more fully below.

Restrictions are imposed on taxable REIT subsidiaries to ensure that they will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary may not deduct interest paid in any year to an affiliated REIT to the extent that the interest payments exceed, generally, 50% of the taxable REIT subsidiary’s adjusted taxable income for that year. However, the taxable REIT subsidiary may carry forward the disallowed interest expense to a succeeding year, and deduct the interest in that later year subject to that year’s 50% adjusted taxable income limitation. In addition, if a taxable REIT subsidiary pays interest, rent, or other amounts to its affiliated REIT in an amount that exceeds what an unrelated third party would have paid in an arm’s length transaction, then the REIT generally will be subject to an excise tax equal to 100% of the excessive portion of the payment. Finally, if in comparison to an arm’s length transaction, a tenant has overpaid rent to the REIT in exchange for underpaying the taxable REIT subsidiary for services rendered, then the REIT may be subject to an excise tax equal to 100% of the overpayment. There can be no assurance that arrangements involving our taxable REIT subsidiaries will not result in the imposition of one or more of these deduction limitations or excise taxes, but we do not believe that we are or will be subject to these impositions.

Income Tests. There are two gross income requirements for qualification as a REIT under the Internal Revenue Code:

•At least 75% of our gross income, excluding gross income from sales or other dispositions of property held primarily for sale, must be derived from investments relating to real property, including “rents from real property” as defined under Section 856 of the Internal Revenue Code, mortgages on real property, or shares in other REITs. When we receive new capital in exchange for our shares or in a public offering of five-year or longer debt instruments, income attributable to the temporary investment of this new capital in stock or a debt instrument, if received or accrued within one year of our receipt of the new capital, is generally also qualifying income under the 75% gross income test.

•At least 95% of our gross income, excluding gross income from sales or other dispositions of property held primarily for sale, must be derived from a combination of items of real property income that satisfy the 75% gross income test described above, dividends, interest, gains from the sale or disposition of stock, securities, or real property or, for financial instruments entered into during our 2004 or earlier taxable years, certain payments under interest rate swap or cap agreements, options, futures contracts, forward rate agreements or similar financial instruments. But for financial instruments entered into during our 2005 or later taxable years, the 95% gross income test has been modified as follows: except as may be provided in Treasury regulations,

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gross income for these purposes no longer includes income from a “hedging transaction” as defined under clauses (ii) and (iii) of Section 1221(b)(2)(A) of the Internal Revenue Code, but only to the extent that (A) the transaction hedges indebtedness we incur to acquire or carry real estate assets, and (B) the hedging transaction was “clearly identified,” meaning that the transaction must be identified as a hedging transaction before the end of the day on which it is entered and the risks being hedged must be identified generally within 35 days after the date the transaction is entered.

For purposes of the 75% and 95% gross income tests outlined above, income derived from a “shared appreciation provision” in a mortgage loan is generally treated as gain recognized on the sale of the property to which it relates. Although we will use our best efforts to ensure that the income generated by our investments will be of a type that satisfies both the 75% and 95% gross income tests, there can be no assurance in this regard.

In order to qualify as “rents from real property” under Section 856 of the Internal Revenue Code, several requirements must be met:

•The amount of rent received generally must not be based on the income or profits of any person, but may be based on receipts or sales.

•Rents do not qualify if the REIT owns 10% or more by vote or value of the tenant, whether directly or after application of attribution rules. While we intend not to lease property to any party if rents from that property would not qualify as rents from real property, application of the 10% ownership rule is dependent upon complex attribution rules and circumstances that may be beyond our control. For example, an unaffiliated third party’s ownership directly or by attribution of 10% or more by value of our shares, as well as 10% or more by vote or value of the stock of one of our tenants, would result in that tenant’s rents not qualifying as rents from real property. Our declaration of trust disallows transfers or purported acquisitions, directly or by attribution, of our shares to the extent necessary to maintain our REIT status under the Internal Revenue Code. Nevertheless, there can be no assurance that these provisions in our declaration of trust will be effective to prevent our REIT status from being jeopardized under the 10% affiliated tenant rule. Furthermore, there can be no assurance that we will be able to monitor and enforce these restrictions, nor will our shareholders necessarily be aware of ownership of shares attributed to them under the Internal Revenue Code’s attribution rules.

•There is a limited exception to the above prohibition on earning “rents from real property” from a 10% affiliated tenant, if the tenant is a taxable REIT subsidiary. If at least 90% of the leased space of a property is leased to tenants other than taxable REIT subsidiaries and 10% affiliated tenants, and if the taxable REIT subsidiary’s rent for space at that property is substantially comparable to the rents paid by nonaffiliated tenants for comparable space at the property, then otherwise qualifying rents paid by the taxable REIT subsidiary to the REIT will not be disqualified on account of the rule prohibiting 10% affiliated tenants.

•There is a second exception to the above prohibition on earning “rents from real property” from a 10% affiliated tenant. For this second exception to apply, a real property interest in a “qualified lodging facility” must be leased by the REIT to its taxable REIT subsidiary, and the facility must be operated on behalf of the taxable REIT subsidiary by a person who is an “eligible independent contractor,” all as described in Section 856(d)(8)-(9) of the Internal Revenue Code. As described below, we believe our leases with our taxable REIT subsidiaries have satisfied and will satisfy these requirements.

•In order for rents to qualify, we generally must not manage the property or furnish or render services to the tenants of the property, except through an independent contractor from whom we derive no income or, for our 2001 taxable year and thereafter, through one of our taxable REIT subsidiaries. There is an exception to this rule permitting a REIT to perform customary tenant services of the sort that a tax-exempt organization could perform without being considered in receipt of “unrelated business taxable income” as defined in Section 512(b)(3) of the Internal Revenue Code. In addition, a de minimis amount of noncustomary services will not disqualify income as “rents from real property” so long as the value of the impermissible services does not exceed 1% of the gross income from the property.

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•If rent attributable to personal property leased in connection with a lease of real property is 15% or less of the total rent received under the lease, then the rent attributable to personal property will qualify as “rents from real property”; if this 15% threshold is exceeded, the rent attributable to personal property will not so qualify. For our taxable years through December 31, 2000, the portion of rental income treated as attributable to personal property was determined according to the ratio of the tax basis of the personal property to the total tax basis of the real and personal property that is rented. For our 2001 taxable year and thereafter, the ratio is determined by reference to fair market values rather than tax bases.

We believe that all or substantially all our rents have qualified and will qualify as rents from real property for purposes of Section 856 of the Internal Revenue Code.

In order to qualify as mortgage interest on real property for purposes of the 75% test, interest must derive from a mortgage loan secured by real property with a fair market value, at the time the loan is made, at least equal to the amount of the loan. If the amount of the loan exceeds the fair market value of the real property, the interest will be treated as interest on a mortgage loan in a ratio equal to the ratio of the fair market value of the real property to the total amount of the mortgage loan.

Certain amounts payable to us under agreements relating to the Canadian hotels we acquired in 2005 may be determined by reference to revenue and expenditure items denominated in Canadian dollars. Currency translation or exchange gains or losses might not count favorably toward the 75% and 95% gross income tests summarized above, and thus, in sufficient amounts, such currency gains could threaten compliance with the REIT income tests. However, because any amounts paid to us, as opposed to our taxable REIT subsidiary, under these Canadian hotel agreements will be denominated in U.S. dollars only, we do not expect to have material amounts of currency gains in respect of our Canadian investments. We expect to employ a similar currency and tax strategy with regard to the Jamaican hotel that we are under contract to acquire.

Other than sales of foreclosure property, any gain we realize on the sale of property held as inventory or other property held primarily for sale to customers in the ordinary course of business will be treated as income from a prohibited transaction that is subject to a penalty tax at a 100% rate. This prohibited transaction income also may adversely affect our ability to satisfy the 75% and 95% gross income tests for federal income tax qualification as a REIT. We cannot provide assurances as to whether or not the IRS might successfully assert that one or more of our dispositions is subject to the 100% penalty tax. However, we believe that dispositions of assets that we have made or that we might make in the future will not be subject to the 100% penalty tax, because we intend to:

•own our assets for investment with a view to long-term income production and capital appreciation;

•engage in the business of developing, owning and operating our existing properties and acquiring, developing, owning and operating new properties; and

•make occasional dispositions of our assets consistent with our long-term investment objectives.

Pursuant to the 2004 Act, if we fail to satisfy one or both of the 75% or the 95% gross income tests in any taxable year, we may nevertheless qualify as a REIT for that year if we satisfy the following requirements after October 22, 2004:

•our failure to meet the test is due to reasonable cause and not due to willful neglect, and

•after we identify the failure, we file a schedule describing each item of our gross income included in the 75% or 95% gross income tests for that taxable year.

It is impossible to state whether in all circumstances we would be entitled to the benefit of this relief provision for the 75% and 95% gross income tests. Even if this relief provision does apply, a 100% tax is imposed upon the greater of the amount by which we failed the 75% test or the 95% test, with adjustments, multiplied by a fraction intended to reflect our profitability. This relief provision applies to any failure of the applicable income tests, even if the failure first

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occurred in a prior taxable year, as long as each of the requirements of the relief provision is satisfied after October 22, 2004.

Under prior law, if we failed to satisfy one or both of the 75% or 95% gross income tests, we nevertheless would have qualified as a REIT for that year if:  our failure to meet the test was due to reasonable cause and not due to willful neglect; we reported the nature and amount of each item of our income included in the 75% or 95% gross income tests for that taxable year on a schedule attached to our tax return; and any incorrect information on the schedule was not due to fraud with intent to evade tax. For our 2004 and prior taxable years, we attached a schedule of gross income to our federal income tax returns, but it is impossible to state whether in all circumstances we would be entitled to the benefit of this prior relief provision for the 75% and 95% gross income tests. Even if this relief provision did apply, a 100% tax is imposed upon the greater of the amount by which we failed the 75% test or the 95% test, with adjustments, multiplied by a fraction intended to reflect our profitability.

Asset Tests. At the close of each quarter of each taxable year, we must also satisfy the following asset percentage tests in order to qualify as a REIT for federal income tax purposes:

•At least 75% of our total assets must consist of real estate assets, cash and cash items, shares in other REITs, government securities, and temporary investments of new capital (that is, stock or debt instruments purchased with proceeds of a stock offering or a public offering of our debt with a term of at least five years, but only for the one-year period commencing with our receipt of the offering proceeds).

•Not more than 25% of our total assets may be represented by securities other than those securities that count favorably toward the preceding 75% asset test.

•Of the investments included in the preceding 25% asset class, the value of any one non-REIT issuer’s securities that we own may not exceed 5% of the value of our total assets, and we may not own more than 10% of any one non-REIT issuer’s outstanding voting securities. For our 2001 taxable year and thereafter, we may not own more than 10% of the vote or value of any one non-REIT issuer’s outstanding securities, unless that issuer is our taxable REIT subsidiary or the securities are “straight debt” securities or otherwise excepted as discussed below.

•For our 2001 taxable year and thereafter, our stock and securities in a taxable REIT subsidiary are exempted from the preceding 10% and 5% asset tests. However, no more than 20% of our total assets may be represented by stock or securities of taxable REIT subsidiaries.

When a failure to satisfy the above asset tests results from an acquisition of securities or other property during a quarter, the failure can be cured by disposition of sufficient nonqualifying assets within 30 days after the close of that quarter.

In addition, for our 2005 taxable year and thereafter, the 2004 Act provides that if we fail the 5% value test or the 10% vote or value tests at the close of any quarter and do not cure such failure within 30 days after the close of that quarter, that failure will nevertheless be excused if (a) the failure is de minimis and (b) within 6 months after the last day of the quarter in which we identify the failure, we either dispose of the assets causing the failure or otherwise satisfy the 5% value and 10% vote and value asset tests. For purposes of this relief provision, the failure will be “de minimis” if the value of the assets causing the failure does not exceed the lesser of (a) 1% of the total value of our assets at the end of the relevant quarter or (b) $10,000,000. If our failure is not de minimis, or if any of the other REIT asset tests have been violated, we may nevertheless qualify as a REIT if (a) we provide the IRS with a description of each asset causing the failure, (b) the failure was due to reasonable cause and not willful neglect, (c) we pay a tax equal to the greater of (i) $50,000 or (ii) the highest rate of corporate tax imposed (currently 35%) on the net income generated by the assets causing the failure during the period of the failure, and (d) within 6 months after the last day of the quarter in which we identify the failure, we either dispose of the assets causing the failure or otherwise satisfy all of the REIT asset tests. These relief provisions apply to any failure of the applicable asset tests, even if the failure first occurred in a prior taxable year, as long as each of the requirements of the relief provision is satisfied after October 22, 2004.

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The 2004 Act also clarifies and expands, on a retroactive basis so as to be effective for our 2001 taxable year forward, an excepted securities safe harbor to the 10% value test that includes among other items (a) “straight debt” securities, (b) certain rental agreements in which payment is to be made in subsequent years, (c) any obligation to pay rents from real property, (d) securities issued by governmental entities that are not dependent in whole or in part on the profits of or payments from a nongovernmental entity, and (e) any security issued by another REIT.

We intend to maintain records of the value of our assets to document our compliance with the above asset tests, and to take actions as may be required to cure any failure to satisfy the tests within 30 days after the close of any quarter.

Our Relationship with Our Taxable REIT Subsidiaries. We currently own hotels that we purchased to be leased to our taxable REIT subsidiaries or which are being leased to our taxable REIT subsidiaries as a result of modifications to a prior lease that were agreed to among us, the former tenant and the manager. We may from time to time in the future lease additional hotels that we acquire in this manner.

In connection with lease defaults, we terminated occupancy of some of our hotels by defaulting tenants and immediately leased these hotels to our taxable REIT subsidiaries and entered into new third party management agreements for these hotels. We may in the future employ similar arrangements if we ever again face lease or occupancy terminations.

In transactions involving our taxable REIT subsidiaries, our intent is that the rents paid to us by the taxable REIT subsidiary qualify as “rents from real property” under the REIT gross income tests summarized above. In order for this to be the case, the manager engaged by the applicable taxable REIT subsidiary must be an “eligible independent contractor” within the meaning of Section 856(d)(9)(A) of the Internal Revenue Code, and the hotels leased to the taxable REIT subsidiary must be “qualified lodging facilities” within the meaning of Section 856(d)(9)(D) of the Internal Revenue Code. Qualified lodging facilities are defined as hotels, motels, or other establishments where more than half of the dwelling units are used on a transient basis, provided that legally authorized wagering or gambling activities are not conducted at or in connection with such facilities. Also included in the definition are the qualified lodging facility’s customary amenities and facilities.

For these purposes, a contractor qualifies as an “eligible independent contractor” if it is less than 35% affiliated with the REIT and, at the time the contractor enters into the agreement with the taxable REIT subsidiary to operate the qualified lodging facility, that contractor or any person related to that contractor is actively engaged in the trade or business of operating qualified lodging facilities for persons unrelated to the taxable REIT subsidiary or its affiliated REIT. For these purposes, an otherwise eligible independent contractor is not disqualified from that status on account of the taxable REIT subsidiary bearing the expenses for the operation of the qualified lodging facility, the taxable REIT subsidiary receiving the revenues from the operation of the qualified lodging facility, net of expenses for that operation and fees payable to the eligible independent contractor, or the REIT receiving income from the eligible independent contractor pursuant to a preexisting or otherwise grandfathered lease of another property.

In one case involving a former manager whose hotel management activities for parties unrelated to us was not as extensive as those of our other managers, we received an opinion of counsel that the particular manager should qualify as an “eligible independent contractor” within the meaning of Section 856(d)(9)(A) of the Internal Revenue Code, and that, although the matter is not free from doubt, it is reasonable for us to rely on such opinion for purposes of the relief provisions under the REIT gross income tests summarized above. Accordingly, although there can be no assurance in this regard, we expect that the rental income we receive from our taxable REIT subsidiaries will qualify as “rents from real property” under the REIT gross income tests. We also took steps to qualify for the 75% and 95% gross income tests’ relief provision, including for example attaching an applicable schedule of gross income to our federal income tax returns as previously required by Section 856(c)(6) of the Internal Revenue Code. Thus, even if the IRS or a court ultimately determines that one or more of our managers failed to operate “qualified lodging facilities” for others sufficient to qualify as an eligible independent contractor, and that this failure thereby implicated our compliance with the REIT gross income tests, we expect we would qualify for the gross income tests’ relief provision and thereby preserve our qualification as a REIT.

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As explained above, we will be subject to a 100% tax if the IRS successfully asserts that the rents paid by our taxable REIT subsidiary to us exceed an arm’s length rental rate. Although there is no clear precedent to distinguish for federal income tax purposes among leases, management contracts, partnerships, financings, and other contractual arrangements, we believe that our leases and our taxable REIT subsidiaries’ management agreements will be respected for purposes of the requirements of the Internal Revenue Code discussed above. Accordingly, we expect that the rental income from our current and future taxable REIT subsidiaries will qualify favorably as “rents from real property,” and that the 100% tax on excessive rents from a taxable REIT subsidiary will not apply.

Annual Distribution Requirements. In order to qualify for taxation as a REIT under the Internal Revenue Code, we are required to make annual distributions other than capital gain dividends to our shareholders in an amount at least equal to the excess of:

(A)the sum of 90% of our “real estate investment trust taxable income,” as defined in Section 857 of the Internal Revenue Code, computed by excluding any net capital gain and before taking into account any dividends paid deduction for which we are eligible, and 90% of our net income after tax, if any, from property received in foreclosure, over

(B)the sum of our qualifying noncash income, e.g., imputed rental income or income from transactions inadvertently failing to qualify as like-kind exchanges.

The distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for the earlier taxable year and if paid on or before the first regular distribution payment after that declaration. If a dividend is declared in October, November, or December to shareholders of record during one of those months, and is paid during the following January, then for federal income tax purposes the dividend will be treated as having been both paid and received on December 31 of the prior taxable year. A distribution which is not pro rata within a class of our beneficial interests entitled to a distribution, or which is not consistent with the rights to distributions among our classes of beneficial interests, is a preferential distribution that is not taken into consideration for purposes of the distribution requirements, and accordingly the payment of a preferential distribution could affect our ability to meet the distribution requirements. Taking into account our distribution policies, including the dividend reinvestment plan we have adopted, we expect that we will not make any preferential distributions. The distribution requirements may be waived by the IRS if a REIT establishes that it failed to meet them by reason of distributions previously made to meet the requirements of the 4% excise tax discussed below. To the extent that we do not distribute all of our net capital gain and all of our real estate investment trust taxable income, as adjusted, we will be subject to tax on undistributed amounts.

In addition, we will be subject to a 4% excise tax to the extent we fail within a calendar year to make required distributions to our shareholders of 85% of our ordinary income and 95% of our capital gain net income plus the excess, if any, of the “grossed up required distribution” for the preceding calendar year over the amount treated as distributed for that preceding calendar year. For this purpose, the term “grossed up required distribution” for any calendar year is the sum of our taxable income for the calendar year without regard to the deduction for dividends paid and all amounts from earlier years that are not treated as having been distributed under the provision. We will be treated as having sufficient earnings and profits to treat as a dividend any distribution by us up to the amount required to be distributed in order to avoid imposition of the 4% excise tax.

If we do not have enough cash or other liquid assets to meet the 90% distribution requirements, we may find it necessary and desirable to arrange for new debt or equity financing to provide funds for required distributions in order to maintain our REIT status. We can provide no assurance that financing would be available for these purposes on favorable terms.

We may be able to rectify a failure to pay sufficient dividends for any year by paying “deficiency dividends” to shareholders in a later year. These deficiency dividends may be included in our deduction for dividends paid for the earlier year, but an interest charge would be imposed upon us for the delay in distribution. Although we may be able to avoid being taxed on amounts distributed as deficiency dividends, we will remain liable for the 4% excise tax discussed above.

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In addition to the other distribution requirements above, to preserve our status as a REIT we are required to timely distribute corporation earnings and profits that we inherit from acquired corporations.

Acquisition of Hotels and C Corporation

In 2005 we purchased a hotel in Puerto Rico. In order to acquire the Puerto Rican hotel, we acquired all of the outstanding stock of a C corporation that owned that hotel as its primary asset. Upon our acquisition, the acquired C corporation became our qualified REIT subsidiary under Section 856(i) of the Internal Revenue Code. Thus, after the acquisition, all assets, liabilities and items of income, deduction and credit of the acquired corporation are treated as ours for purposes of the various REIT qualification tests described above. In a stock acquisition such as this, we are generally treated as the successor to the acquired corporation’s federal income tax attributes, such as its adjusted tax bases in its assets and its C corporation earnings and profits. However, because we made an election under Section 338(g) of the Internal Revenue Code in respect of this acquired corporation, we did not succeed to its earnings and profits, nor do we have any built-in gain in the former C corporation’s assets. We expect to use a similar tax and acquisition structure to acquire the Jamaican hotel that we are under contract to acquire.

Depreciation and Federal Income Tax Treatment of Leases

Our initial tax bases in our assets will generally be our acquisition cost. We will generally depreciate our real property on a straight-line basis over 40 years and our personal property over 9 years. These depreciation schedules may vary for properties that we acquire through tax-free or carryover basis acquisitions.

We are entitled to depreciation deductions from our facilities only if we are treated for federal income tax purposes as the owner of the facilities. This means that the leases of the facilities must be classified for federal income tax purposes as true leases, rather than as sales or financing arrangements, and we believe this to be the case. In the case of sale-leaseback arrangements, the IRS could assert that we realized prepaid rental income in the year of purchase to the extent that the value of a leased property, at the time of purchase, exceeded the purchase price for that property. While we believe that the value of leased property at the time of purchase did not exceed purchase prices, because of the lack of clear precedent we cannot provide assurances as to whether the IRS might successfully assert the existence of prepaid rental income in any of our sale-leaseback transactions.

Taxation of U.S. Shareholders

The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the maximum individual federal income tax rate for long-term capital gains generally to 15% (for gains properly taken into account during the period beginning May 6, 2003, and ending for taxable years that begin after December 31, 2008) and for most corporate dividends generally to 15% (for taxable years that begin in the years 2003 through 2008). However, because we are not generally subject to federal income tax on the portion of our REIT taxable income or capital gains distributed to our shareholders, dividends on our shares generally are not eligible for the new 15% tax rate on dividends. As a result, our ordinary dividends continue to be taxed at the higher federal income tax rates applicable to ordinary income. However, the 15% federal income tax rate for long-term capital gains and dividends generally applies to:

(1)your long-term capital gains, if any, recognized on the disposition of our shares;

(2)our distributions designated as long-term capital gain dividends (except to the extent attributable to real estate depreciation recapture, in which case the distributions are subject to a 25% federal income tax rate);

(3)our dividends attributable to dividends, if any, received by us from non-REIT corporations such as taxable REIT subsidiaries; and

(4)our dividends to the extent attributable to income upon which we have paid federal corporate income tax.

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As long as we qualify as a REIT for federal income tax purposes, a distribution to our U.S. shareholders that we do not designate as a capital gain dividend will be treated as an ordinary income dividend to the extent of our current or accumulated earnings and profits. Distributions made out of our current or accumulated earnings and profits that we properly designate as capital gain dividends will be taxed as long-term capital gains, as discussed below, to the extent they do not exceed our actual net capital gain for the taxable year. However, corporate shareholders may be required to treat up to 20% of any capital gain dividend as ordinary income under Section 291 of the Internal Revenue Code.

In addition, we may elect to retain net capital gain income and treat it as constructively distributed. In that case:

(1)we will be taxed at regular corporate capital gains tax rates on retained amounts;

(2)each U.S. shareholder will be taxed on its designated proportionate share of our retained net capital gains as though that amount were distributed and designated a capital gain dividend;

(3)each U.S. shareholder will receive a credit for its designated proportionate share of the tax that we pay;

(4)each U.S. shareholder will increase its adjusted basis in our shares by the excess of the amount of its proportionate share of these retained net capital gains over its proportionate share of this tax that we pay; and

(5)both we and our corporate shareholders will make commensurate adjustments in our respective earnings and profits for federal income tax purposes.

If we elect to retain our net capital gains in this fashion, we will notify our U.S. shareholders of the relevant tax information within 60 days after the close of the affected taxable year.

As discussed above, for noncorporate U.S. shareholders, long-term capital gains are generally taxed at maximum rates of 15% or 25%, depending upon the type of property disposed of and the previously claimed depreciation with respect to this property. If for any taxable year we designate capital gain dividends for U.S. shareholders, then the portion of the capital gain dividends we designate will be allocated to the holders of a particular class of shares on a percentage basis equal to the ratio of the amount of the total dividends paid or made available for the year to the holders of that class of shares to the total dividends paid or made available for the year to holders of all classes of our shares. We will similarly designate the portion of any capital gain dividend that is to be taxed to noncorporate U.S. shareholders at the maximum rates of 15% or 25% so that the designations will be proportionate among all classes of our shares.

Distributions in excess of current or accumulated earnings and profits will not be taxable to a U.S. shareholder to the extent that they do not exceed the shareholder’s adjusted tax basis in the shareholder’s shares, but will reduce the shareholder’s basis in those shares. To the extent that these excess distributions exceed the adjusted basis of a U.S. shareholder’s shares, they will be included in income as capital gain, with long-term gain generally taxed to noncorporate U.S. shareholders at a maximum rate of 15%. No U.S. shareholder may include on his federal income tax return any of our net operating losses or any of our capital losses.

Dividends that we declare in October, November or December of a taxable year to U.S. shareholders of record on a date in those months will be deemed to have been received by shareholders on December 31 of that taxable year, provided we actually pay these dividends during the following January. Also, items that are treated differently for regular and alternative minimum tax purposes are to be allocated between a REIT and its shareholders under Treasury regulations which are to be prescribed. It is possible that these Treasury regulations will require tax preference items to be allocated to our shareholders with respect to any accelerated depreciation or other tax preference items that we claim.

A U.S. shareholder will recognize gain or loss equal to the difference between the amount realized and the shareholder’s adjusted basis in our shares that are sold or exchanged. This gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the shareholder’s holding period in the shares exceeds one year. In addition, any loss upon a sale or exchange of our shares held for six months or less will generally be treated as a long-term capital loss to the extent of our long-term capital gain dividends during the holding period.

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The 2004 Act imposes a penalty, effective for federal tax returns with due dates after October 22, 2004, for the failure to properly disclose a “reportable transaction.” A reportable transaction currently includes, among other things, a sale or exchange of our shares resulting in a tax loss in excess of (i) $10 million in any single year or $20 million in any combination of years in the case of our shares held by a C corporation or by a partnership with only C corporation partners or (ii) $2 million in any single year or $4 million in any combination of years in the case of our shares held by any other partnership or an S corporation, trust or individual, including losses that flow through pass through entities to individuals. A taxpayer discloses a reportable transaction by filing IRS Form 8886 with its federal income tax return and, in the first year of filing, a copy of Form 8886 must be sent to the IRS’s Office of Tax Shelter Analysis. The penalty for failing to disclose a reportable transaction is generally $10,000 in the case of a natural person and $50,000 in any other case.

Noncorporate U.S. shareholders who borrow funds to finance their acquisition of our shares could be limited in the amount of deductions allowed for the interest paid on the indebtedness incurred. Under Section 163(d) of the Internal Revenue Code, interest paid or accrued on indebtedness incurred or continued to purchase or carry property held for investment is generally deductible only to the extent of the investor’s net investment income. A U.S. shareholder’s net investment income will include ordinary income dividend distributions received from us and, if an appropriate election is made by the shareholder, capital gain dividend distributions received from us; however, distributions treated as a nontaxable return of the shareholder’s basis will not enter into the computation of net investment income.

Taxation of Tax-Exempt Shareholders

In Revenue Ruling 66-106, the IRS ruled that amounts distributed by a REIT to a tax-exempt employees’ pension trust did not constitute “unrelated business taxable income,” even though the REIT may have financed some of its activities with acquisition indebtedness. Although revenue rulings are interpretive in nature and subject to revocation or modification by the IRS, based upon the analysis and conclusion of Revenue Ruling 66-106, our distributions made to shareholders that are tax-exempt pension plans, individual retirement accounts, or other qualifying tax-exempt entities should not constitute unrelated business taxable income, unless the shareholder has financed its acquisition of our shares with “acquisition indebtedness” within the meaning of the Internal Revenue Code.

Tax-exempt pension trusts, including so-called 401(k) plans but excluding individual retirement accounts or government pension plans, that own more than 10% by value of a “pension-held REIT” at any time during a taxable year may be required to treat a percentage of all dividends received from the pension-held REIT during the year as unrelated business taxable income. This percentage is equal to the ratio of:

(1)the pension-held REIT’s gross income derived from the conduct of unrelated trades or businesses, determined as if the pension-held REIT were a tax-exempt pension fund, less direct expenses related to that income, to

(2)the pension-held REIT’s gross income from all sources, less direct expenses related to that income,

except that this percentage shall be deemed to be zero unless it would otherwise equal or exceed 5%. A REIT is a pension-held REIT if:

•the REIT is “predominantly held” by tax-exempt pension trusts; and

•the REIT would fail to satisfy the “closely held” ownership requirement discussed above if the stock or beneficial interests in the REIT held by tax-exempt pension trusts were viewed as held by tax-exempt pension trusts rather than by their respective beneficiaries.

A REIT is predominantly held by tax-exempt pension trusts if at least one tax-exempt pension trust owns more than 25% by value of the REIT’s stock or beneficial interests, or if one or more tax-exempt pension trusts, each owning more than 10% by value of the REIT’s stock or beneficial interests, own in the aggregate more than 50% by value of the REIT’s stock or beneficial interests. Because of the share ownership concentration restrictions in our declaration of trust, we believe that we are not and will not be a pension-held REIT. However, because our shares are publicly traded, we cannot completely control whether or not we are or will become a pension-held REIT.

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Social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts and qualified group legal services plans exempt from federal income taxation under Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Internal Revenue Code, respectively, are subject to different unrelated business taxable income rules, which generally will require them to characterize distributions from a REIT as unrelated business taxable income. In addition, these prospective investors should consult their own tax advisors concerning any “set aside” or reserve requirements applicable to them.

Taxation of Non-U.S. Shareholders

The rules governing the United States federal income taxation of non-U.S. shareholders are complex, and the following discussion is intended only as a summary of these rules. If you are a non-U.S. shareholder, we urge you to consult with your own tax advisor to determine the impact of United States federal, state, local, and foreign tax laws, including any tax return filing and other reporting requirements, with respect to your investment in our shares.

In general, a non-U.S. shareholder will be subject to regular United States federal income tax in the same manner as a U.S. shareholder with respect to its investment in our shares if that investment is effectively connected with the non-U.S. shareholder’s conduct of a trade or business in the United States. In addition, a corporate non-U.S. shareholder that receives income that is or is deemed effectively connected with a trade or business in the United States may also be subject to the 30% branch profits tax under Section 884 of the Internal Revenue Code, which is payable in addition to regular United States federal corporate income tax. The balance of this discussion of the United States federal income taxation of non-U.S. shareholders addresses only those non-U.S. shareholders whose investment in our shares is not effectively connected with the conduct of a trade or business in the United States.

A distribution by us to a non-U.S. shareholder that is not attributable to gain from the sale or exchange of a United States real property interest and that is not designated as a capital gain dividend will be treated as an ordinary income dividend to the extent that it is made out of current or accumulated earnings and profits. A distribution of this type will generally be subject to United States federal income tax and withholding at the rate of 30%, or at a lower rate if the non-U.S. shareholder has in the manner prescribed by the IRS demonstrated its entitlement to benefits under a tax treaty. Because we cannot determine our current and accumulated earnings and profits until the end of the taxable year, withholding at the rate of 30% or applicable lower treaty rate will generally be imposed on the gross amount of any distribution to a non-U.S. shareholder that we make and do not designate a capital gain dividend. Notwithstanding this withholding on distributions in excess of our current and accumulated earnings and profits, these distributions are a nontaxable return of capital to the extent that they do not exceed the non-U.S. shareholder’s adjusted basis in our shares, and the nontaxable return of capital will reduce the adjusted basis in these shares. To the extent that distributions in excess of current and accumulated earnings and profits exceed the non-U.S. shareholder’s adjusted basis in our shares, the distributions will give rise to tax liability if the non-U.S. shareholder would otherwise be subject to tax on any gain from the sale or exchange of these shares, as discussed below. A non-U.S. shareholder may seek a refund from the IRS of amounts withheld on distributions to him in excess of our current and accumulated earnings and profits.

Capital gain dividends that are received by a non-U.S. shareholder, including dividends attributable to our sales of United States real property interests, and that are deductible by us in respect of our 2005 taxable year and thereafter will be subject to the taxation and withholding regime applicable to ordinary income dividends and the branch profits tax will not apply, provided that (1) the capital gain dividends are received with respect to a class of shares that is “regularly traded” on a domestic “established securities market” like the NYSE, both as defined by applicable Treasury regulations, and (2) the foreign shareholder does not own more than 5% of that class of shares at any time during the one-year period ending on the date of distribution of the capital gain dividends. If both of these provisions are satisfied, qualifying non-U.S. shareholders will not be subject to withholding on capital gain dividends as though those amounts were effectively connected with a United States trade or business, and qualifying non-U.S. shareholders will not be required to file United States federal income tax returns or pay branch profits tax in respect of these capital gain dividends. Instead, these dividends will be subject to United States federal income tax and withholding as ordinary dividends, currently at a 30% tax rate unless reduced by applicable treaty, as discussed below. We believe that our shares are and will be “regularly traded” on an “established securities market” within the definition of each term provided in applicable Treasury regulations; however, we can provide no assurance that our shares will continue to be “regularly traded” on an “established securities market” in future taxable years.

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Except as discussed above, for any year in which we qualify as a REIT, distributions that are attributable to gain from the sale or exchange of a United States real property interest are taxed to a non-U.S. shareholder as if these distributions were gains effectively connected with a trade or business in the United States conducted by the non-U.S. shareholder. Accordingly, a non-U.S. shareholder that does not qualify for the provision above or that received dividends for taxable years before 2005 will be taxed on these amounts at the normal capital gain rates applicable to a U.S. shareholder, subject to any applicable alternative minimum tax and to a special alternative minimum tax in the case of nonresident alien individuals; such a non-U.S. shareholder will be required to file a United States federal income tax return reporting these amounts, even if applicable withholding is imposed as described below; and such a non-U.S. shareholder that is also a corporation may owe the 30% branch profits tax under Section 884 of the Internal Revenue Code in respect of these amounts. We will be required to withhold from distributions to such non-U.S. shareholders, and remit to the IRS, 35% of the maximum amount of any distribution that could be designated as a capital gain dividend. In addition, for purposes of this withholding rule, if we designate prior distributions as capital gain dividends, then subsequent distributions up to the amount of the designated prior distributions will be treated as capital gain dividends. The amount of any tax withheld is creditable against the non-U.S. shareholder’s United States federal income tax liability, and the non-U.S. shareholder may file for a refund from the IRS of any amount of withheld tax in excess of that tax liability.

If for any taxable year we designate capital gain dividends for our shareholders, then the portion of the capital gain dividends we designate will be allocated to the holders of a particular class of shares on a percentage basis equal to the ratio of the amount of the total dividends paid or made available for the year to the holders of that class of shares to the total dividends paid or made available for the year to holders of all classes of our shares.

Tax treaties may reduce the withholding obligations on our distributions. Under some treaties, however, rates below 30% that are applicable to ordinary income dividends from United States corporations may not apply to ordinary income dividends from a REIT or may apply only if the REIT meets certain additional conditions. You must generally use an applicable IRS Form W-8, or substantially similar form, to claim tax treaty benefits. If the amount of tax withheld by us with respect to a distribution to a non-U.S. shareholder exceeds the shareholder’s United States federal income tax liability with respect to the distribution, the non-U.S. shareholder may file for a refund of the excess from the IRS. The 35% withholding tax rate discussed above on some capital gain dividends corresponds to the maximum income tax rate applicable to corporate non-U.S. shareholders but is higher than the 15% and 25% maximum rates on capital gains generally applicable to noncorporate non-U.S. shareholders. Treasury regulations also provide special rules to determine whether, for purposes of determining the applicability of a tax treaty, our distributions to a non-U.S. shareholder that is an entity should be treated as paid to the entity or to those owning an interest in that entity, and whether the entity or its owners are entitled to benefits under the tax treaty.

If our shares are not “United States real property interests” within the meaning of Section 897 of the Internal Revenue Code, a non-U.S. shareholder’s gain on sale of these shares generally will not be subject to United States federal income taxation, except that a nonresident alien individual who was in the United States for 183 days or more during the taxable year will be subject to a 30% tax on this gain. Our shares will not constitute a United States real property interest if we are a “domestically controlled REIT.” A domestically controlled REIT is a REIT in which at all times during the preceding five-year period less than 50% in value of its shares is held directly or indirectly by foreign persons. We believe that we are and will be a domestically controlled REIT and thus a non-U.S. shareholder’s gain on sale of our shares will not be subject to United States federal income taxation. However, because our shares are publicly traded, we can provide no assurance that we will be a domestically controlled REIT. If we are not a domestically controlled REIT, a non-U.S. shareholder’s gain on sale of our shares will not be subject to United States federal income taxation as a sale of a United States real property interest, if that class of shares is “regularly traded,” as defined by applicable Treasury regulations, on an established securities market like the New York Stock Exchange, and the non-U.S. shareholder has at all times during the preceding five years owned 5% or less by value of that class of shares. If the gain on the sale of our shares were subject to United States federal income taxation, the non-U.S. shareholder will generally be subject to the same treatment as a U.S. shareholder with respect to its gain, will be required to file a United States federal income tax return reporting that gain, and a corporate non-U.S. shareholder might owe branch profits tax under Section 884 of the Internal Revenue Code. A purchaser of our shares from a non-U.S. shareholder will not be required to withhold on the purchase price if the purchased shares are regularly traded on an established securities market or if we are a domestically controlled REIT. Otherwise, a purchaser of our shares from a non-U.S. shareholder

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may be required to withhold 10% of the purchase price paid to the non-U.S. shareholder and to remit the withheld amount to the IRS.

Backup Withholding and Information Reporting

Information reporting and backup withholding may apply to distributions or proceeds paid to our shareholders under the circumstances discussed below. The backup withholding rate is currently 28%. Amounts withheld under backup withholding are generally not an additional tax and may be refunded by the IRS or credited against the REIT shareholder’s federal income tax liability.

A U.S. shareholder will be subject to backup withholding when it receives distributions on our shares or proceeds upon the sale, exchange, redemption, retirement or other disposition of our shares, unless the U.S. shareholder properly executes, or has previously properly executed, under penalties of perjury an IRS Form W-9 or substantially similar form that:

•provides the U.S. shareholder’s correct taxpayer identification number; and

•certifies that the U.S. shareholder is exempt from backup withholding because it is a corporation or comes within another exempt category, it has not been notified by the IRS that it is subject to backup withholding, or it has been notified by the IRS that it is no longer subject to backup withholding.

If the U.S. shareholder has not and does not provide its correct taxpayer identification number on the IRS Form W-9 or substantially similar form, it may be subject to penalties imposed by the IRS, and the REIT or other withholding agent may have to withhold a portion of any capital gain distributions paid to it. Unless the U.S. shareholder has established on a properly executed IRS Form W-9 or substantially similar form that it is a corporation or comes within another exempt category, distributions on our shares paid to it during the calendar year, and the amount of tax withheld, if any, will be reported to it and to the IRS.

Distributions on our shares to a non-U.S. shareholder during each calendar year and the amount of tax withheld, if any, will generally be reported to the non-U.S. shareholder and to the IRS. This information reporting requirement applies regardless of whether the non-U.S. shareholder is subject to withholding on distributions on our shares or whether the withholding was reduced or eliminated by an applicable tax treaty. Also, distributions paid to a non-U.S. shareholder on our shares may be subject to backup withholding, unless the non-U.S. shareholder properly certifies its non-U.S. shareholder status on an IRS Form W-8 or substantially similar form in the manner described above. Similarly, information reporting and backup withholding will not apply to proceeds a non-U.S. shareholder receives upon the sale, exchange, redemption, retirement or other disposition of our shares, if the non-U.S. shareholder properly certifies its non-U.S. shareholder status on an IRS Form W-8 or substantially similar form. Even without having executed an IRS Form W-8 or substantially similar form, however, in some cases information reporting and backup withholding will not apply to proceeds that a non-U.S. shareholder receives upon the sale, exchange, redemption, retirement or other disposition of our shares if the non-U.S. shareholder receives those proceeds through a broker’s foreign office.

Other Tax Consequences

Our tax treatment and that of our shareholders may be modified by legislative, judicial, or administrative actions at any time, which actions may be retroactive in effect. The rules dealing with federal income taxation are constantly under review by the Congress, the IRS and the Treasury Department, and statutory changes, new regulations, revisions to existing regulations, and revised interpretations of established concepts are issued frequently. Likewise, the rules regarding taxes other than federal income taxes may also be modified. No prediction can be made as to the likelihood of passage of new tax legislation or other provisions or the direct or indirect effect on us and our shareholders. Revisions to tax laws and interpretations of these laws could adversely affect the tax or other consequences of an investment in our shares. We and our shareholders may also be subject to taxation by state, local or other jurisdictions, including those in which we or our shareholders transact business or reside. These tax consequences may not be comparable to the federal income tax consequences discussed above.

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ERISA PLANS, KEOGH PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS

General Fiduciary Obligations

Fiduciaries of a pension, profit-sharing or other employee benefit plan subject to Title I of the Employee Retirement Income Security Act of 1974, ERISA, must consider whether:

•their investment in our shares satisfies the diversification requirements of ERISA;

•the investment is prudent in light of possible limitations on the marketability of our shares;

•they have authority to acquire our shares under the applicable governing instrument and Title I of ERISA; and

•the investment is otherwise consistent with their fiduciary responsibilities.

Trustees and other fiduciaries of an ERISA plan may incur personal liability for any loss suffered by the plan on account of a violation of their fiduciary responsibilities. In addition, these fiduciaries may be subject to a civil penalty of up to 20% of any amount recovered by the plan on account of a violation. Fiduciaries of any IRA, Roth IRA, Keogh Plan or other qualified retirement plan not subject to Title I of ERISA, referred to as “non-ERISA plans,” should consider that a plan may only make investments that are authorized by the appropriate governing instrument. Fiduciary shareholders should consult their own legal advisors if they have any concern as to whether the investment is consistent with the foregoing criteria.

Prohibited Transactions

Fiduciaries of ERISA plans and persons making the investment decision for an IRA or other non-ERISA plan should consider the application of the prohibited transaction provisions of ERISA and the Internal Revenue Code in making their investment decision. Sales and other transactions between an ERISA or non-ERISA plan, and persons related to it, are prohibited transactions. The particular facts concerning the sponsorship, operations and other investments of an ERISA plan or non-ERISA plan may cause a wide range of other persons to be treated as disqualified persons or parties in interest with respect to it. A prohibited transaction, in addition to imposing potential personal liability upon fiduciaries of ERISA plans, may also result in the imposition of an excise tax under the Internal Revenue Code or a penalty under ERISA upon the disqualified person or party in interest with respect to the plan. If the disqualified person who engages in the transaction is the individual on behalf of whom an IRA or Roth IRA is maintained or his beneficiary, the IRA or Roth IRA may lose its tax-exempt status and its assets may be deemed to have been distributed to the individual in a taxable distribution on account of the prohibited transaction, but no excise tax will be imposed. Fiduciary shareholders should consult their own legal advisors as to whether the ownership of our shares involves a prohibited transaction.

“Plan Assets” Considerations

The Department of Labor, which has administrative responsibility over ERISA plans as well as non-ERISA plans, has issued a regulation defining “plan assets.” The regulation generally provides that when an ERISA or non-ERISA plan acquires a security that is an equity interest in an entity and that security is neither a “publicly offered security” nor a security issued by an investment company registered under the Investment Company Act of 1940, the ERISA plan’s or non-ERISA plan’s assets include both the equity interest and an undivided interest in each of the underlying assets of the entity, unless it is established either that the entity is an operating company or that equity participation in the entity by benefit plan investors is not significant.

Each class of our shares (that is, our common shares and any class of preferred shares that we have issued or may issue) must be analyzed separately to ascertain whether it is a publicly offered security. The regulation defines a publicly offered security as a security that is “widely held,” “freely transferable” and either part of a class of securities registered under the Exchange Act, or sold under an effective registration statement under the Securities Act of 1933, as amended, provided the securities are registered under the Exchange Act within 120 days after the end of the fiscal year

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of the issuer during which the offering occurred. Each class of our outstanding shares has been registered under the Exchange Act.

The regulation provides that a security is “widely held” only if it is part of a class of securities that is owned by 100 or more investors independent of the issuer and of one another. However, a security will not fail to be “widely held” because the number of independent investors falls below 100 subsequent to the initial public offering as a result of events beyond the issuer’s control. Our common shares and our preferred shares have been widely held and we expect our common shares and our preferred shares to continue to be widely held. We expect the same to be true of any additional class of preferred stock that we may issue, but we can give no assurance in that regard.

The regulation provides that whether a security is “freely transferable” is a factual question to be determined on the basis of all relevant facts and circumstances. The regulation further provides that, where a security is part of an offering in which the minimum investment is $10,000 or less, some restrictions on transfer ordinarily will not, alone or in combination, affect a finding that these securities are freely transferable. The restrictions on transfer enumerated in the regulation as not affecting that finding include:

•any restriction on or prohibition against any transfer or assignment which would result in a termination or reclassification for federal or state tax purposes, or would otherwise violate any state or federal law or court order;

•any requirement that advance notice of a transfer or assignment be given to the issuer and any requirement that either the transferor or transferee, or both, execute documentation setting forth representations as to compliance with any restrictions on transfer which are among those enumerated in the regulation as not affecting free transferability, including those described in the preceding clause of this sentence;

•any administrative procedure which establishes an effective date, or an event prior to which a transfer or assignment will not be effective; and

•any limitation or restriction on transfer or assignment that is not imposed by the issuer or a person acting on behalf of the issuer.

We believe that the restrictions imposed under our declaration of trust on the transfer of shares do not result in the failure of our shares to be “freely transferable.” Furthermore, we believe that there exist no other facts or circumstances limiting the transferability of our shares which are not included among those enumerated as not affecting their free transferability under the regulation, and we do not expect or intend to impose in the future, or to permit any person to impose on our behalf, any limitations or restrictions on transfer which would not be among the enumerated permissible limitations or restrictions.

Assuming that each class of our shares will be “widely held” and that no other facts and circumstances exist which restrict transferability of these shares, we have received an opinion of our counsel, Sullivan & Worcester LLP, that our shares will not fail to be “freely transferable” for purposes of the regulation due to the restrictions on transfer of the shares under our declaration of trust and that under the regulation each class of our currently outstanding shares is publicly offered and our assets will not be deemed to be “plan assets” of any ERISA plan or non-ERISA plan that invests in our shares.

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Item 1A. Risk Factors

Our business faces many risks. The risks described below may not be the only risks we face. Additional risks that we do not yet know of, or that we currently think are immaterial, may also impair our business operations or financial results. If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could suffer and the trading price of our debt or equity securities could decline. Investors and prospective investors should consider the following risks and the information contained under the heading “Warning Concerning Forward-Looking Statements” before deciding whether to invest in our securities.

Some of our returns and rents are guaranteed by parent entities or affiliates of our tenants or hotel operators, but these guarantees may be limited or the guarantors may be unable to honor their commitments. Other security features in our leases may not be sufficient to cover all obligations due to us.

Each management agreement or lease that we have entered into includes various terms intended to secure the payments due to us, including some or all of the following: security deposits which we received but do not escrow, subordination or management fees payable to the hotel operator to some or all of our return or rent and full or limited guarantees from the manager’s or tenant’s parent company. However, the effectiveness of these various security features to provide uninterrupted payments to us is not assured, particularly if the profitability of our hotels is at a depressed level for an extended period. Also, these security features may not be sufficient to cover all obligations due to us. We may not receive payments under certain of our guarantees because the guaranty amount is exhausted, because the guarantor’s financial condition deteriorates and it is unable to meet its obligations or for some other reason. Under the terms of some of our guarantees, the guarantors may be released if cash flows from the affected hotels exceed certain threshold amounts, and such releases would be effective even if cash flows subsequently decline.

We are not permitted to operate our hotels and we are dependent on the managers and tenants of our hotels.

Because federal income tax laws restrict REITs and their subsidiaries from operating hotels, we do not manage our hotels. Instead, we or our subsidiaries that qualify as “taxable REIT subsidiaries” under applicable REIT laws either retain third party managers to manage our hotels pursuant to management agreements or lease our hotels to hotel operating companies. Our income from the hotels may be adversely affected if our managers or tenants fail to provide quality services and amenities to hotel guests or if they fail to maintain a quality brand name. While we or our taxable REIT subsidiaries monitor our hotel managers’ and tenants’ performance, we have limited recourse under our management agreements and leases if we believe that the hotel managers or tenants are not performing adequately. Failure by our hotel managers or tenants to fully perform the duties agreed to in our management agreements and leases could adversely affect our results of operations. In addition, our hotel managers or tenants manage, and in some cases own or have invested in, hotels that compete with our hotels, which may result in conflicts of interest. As a result, our hotel managers or tenants have in the past made and may in the future make decisions regarding competing lodging facilities that are not or would not be in our best interests.

In the recent past, events beyond our control, including an economic slowdown, the war with Iraq and terrorism, harmed the operating performance of the hotel industry generally and the performance of our hotels. If these or similar events occur again, our operating and financial results may be harmed by declines in average daily room rates or occupancy.

The terrorist attacks of September 11, 2001 had a dramatic adverse effect on business and leisure travel and on our occupancy and average daily rate, or ADR. Future terrorist activities could have a similarly harmful effect on both the hotel industry and us. As a result of terrorism concerns, the war with Iraq and the impact of a recessionary economy, the U.S. hotel industry generally and our hotels specifically experienced significant declines in occupancy, revenues and profitability in 2001, 2002 and 2003. While the performance of our hotels have improved, the uncertainty associated with the continuing war on terrorism and the possibility of future attacks may adversely impact business and leisure travel patterns and, accordingly, our business.

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We are dependant on a limited number of operators for our hotels and we have a high concentration of our hotels with a limited number of operators and their hotel brands.

Two of our unaffiliated hotel operators operate approximately 80% of our hotels by investment. If we were to have a dispute with one of these two operators, or if one of these operators were to fail to provide quality services and amenities or to maintain quality brand names, our income from these hotels may be adversely affected. Additionally, should we be required to replace any of our hotel operators, this could result in significant disruptions at the affected hotels and declines in our profitability and cash flows.

We may be unable to access the capital necessary to repay debt or grow.

To retain our status as a REIT, we are required to distribute 90% of our taxable income to shareholders and we generally cannot use income from operations to repay debt or fund our growth. Accordingly, our business and growth strategy depends, in part, upon our ability to raise additional capital at reasonable costs to fund new investments. We believe we will be able to raise additional debt and equity capital at reasonable costs to refinance our debts at or prior to their maturities and to invest at yields that exceed our cost of capital. However, our ability to raise reasonably priced capital is not guaranteed; we may be unable to raise reasonably priced capital because of reasons related to our business or for reasons beyond our control, such as market conditions. Our growth strategy is not assured and may fail.

Acquisitions that we make may not be successful.

Our business strategy contemplates additional acquisitions. We cannot assure our investors that acquisitions we make will prove to be successful. We might encounter unanticipated difficulties and expenditures relating to any acquired properties. Newly acquired properties might require significant management attention that would otherwise be devoted to our ongoing business. Also, future acquisitions of hotels may not yield the returns we expect and, if financed using high cost debt or equity, may result in shareholder dilution.

We face competition for the acquisition of hotels.

We compete with institutional pension funds, private equity investors, other REITs, owner operators of hotels and others who are engaged in the acquisition of hotels. Some of our competitors have greater financial resources and more experienced personnel than we have. These competitors may affect the supply/demand dynamics and, accordingly, increase the price we must pay for hotels we seek to acquire. Furthermore, owners of hotels who offer them for sale may find our competitors to be more attractive buyers because they may have greater financial resources, may be willing to pay more, or may have a more compatible operating philosophy.

The loss of our tax status as a REIT would have significant adverse consequences to us and reduce the value of your common shares.

As a REIT, we generally do not pay federal and state income taxes. However, our continued qualification as a REIT is dependent upon our compliance with complex provisions of the Internal Revenue Code for which there are available only limited judicial or administrative interpretations. We believe we have operated; and are operating, as a REIT in compliance with the Internal Revenue Code. However, we cannot assure our shareholders that, upon review or audit, the IRS will agree with this conclusion. If we cease to be a REIT, we would violate a covenant in our bank credit facilities, our ability to raise capital could be adversely affected, we may be subject to material amounts of federal and state income taxes and the value of our shares would likely decline.

There is no assurance that we will make distributions in the future.

We intend to continue to pay quarterly distributions to our shareholders consistent with our historical practice. However, our ability to pay distributions will be adversely affected if any of the risks described herein occur. Our payment of distributions is subject to compliance with restrictions contained in our revolving bank credit facility and our note indenture. All our distributions are made at the discretion of our board of trustees and our future distributions will depend upon our earnings, our cash flows, our anticipated cash flows, our financial condition, maintenance of our REIT tax status and such other factors as our board of trustees may deem relevant from time to time. There are no

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assurances of our ability to pay distributions in the future. In addition, our distributions in the past have included, and may in the future include, a return of capital.

We may be unable to provide the funding required by our managers and tenants for the refurbishment of our hotels.

Some of our management agreements and lease arrangements require us to invest money for refurbishments and capital improvements to our hotels in some circumstances. We may have to invest more than expected in order to achieve and maintain the competitive position and future financial performance of our hotels. We may not have the necessary funds to invest, and such expenditures, if made, may not be sufficient to maintain the successful financial performance of our hotels. Our management agreements and lease arrangements require us to maintain the hotels in a certain required condition. If we fail to maintain these required standards, then the manager or tenant may terminate the management or lease agreement and hold us liable for damages we may have caused.

Our business dealings with our managing trustees and affiliated entities may create conflicts of interest.

We have no employees. Personnel and other services which we require are provided to us under contract by our manager, RMR. RMR is majority beneficially owned by one of our trustees, Barry Portnoy. The remainder of RMR is beneficially owned by Adam Portnoy, Barry Portnoy’s son, who is also an executive officer of RMR. In addition, John Murray, our President, Chief Operating Officer and Secretary, Mark Kleifges, our Treasurer and Chief Financial Officer, and Ethan Bornstein, our Vice President are executive officers of RMR, and Gerard Martin, another of our trustees, is a director of RMR. We pay RMR a fee based in large part upon the amount of our investments. Our agreement with RMR also provides for payment to RMR of incentive fees under certain circumstances. Any incentive fees are payable through the issuance of restricted common shares by us to RMR. Our fee arrangement with RMR could encourage RMR to advocate acquisitions and discourage sales by us. RMR also acts as the manager for two other publicly owned REITs: HRPT, which primarily owns office buildings; and Senior Housing Properties Trust, or SNH, which owns senior housing properties. We were formerly a 100% owned subsidiary of HRPT, and HRPT continues to own 4 million of our common shares or about 6% of our total common shares outstanding as of December 31, 2005. RMR also provides services to Five Star Quality Care, Inc., or Five Star, under a shared services agreement, and RMR has other business interests. Messrs. Barry Portnoy and Martin also serve as managing trustees of HRPT and SNH and as managing directors of Five Star. Mr. Adam Portnoy is Executive Vice President of HRPT. These multiple responsibilities to public companies and other businesses could create competition among these companies for the time and efforts of RMR and Messrs. Barry and Adam Portnoy and Martin. All of the contractual arrangements between us and RMR have been approved by our trustees other than Messrs. Barry Portnoy and Martin. Each of our trustees other than Messrs. Barry Portnoy and Martin serve as a trustee or director of one or more other companies with which RMR has contractual arrangements similar to its contracts with us, including HRPT and SNH. We believe that the quality and depth of management available to us by contracting with RMR could not be duplicated by our being a self-advised company or by our contracting with unrelated third parties without considerable cost increases. A termination of our contract with RMR is a default under our revolving bank credit facility unless approved by a majority of the lenders. The fact that we believe that our relationships with RMR and our managing trustees have been beneficial to us in the past does not guarantee that these related party transactions may not be detrimental to us in the future.

Ownership limitations and anti-takeover provisions in our declaration of trust and under Maryland law may prevent our shareholders from receiving a takeover premium.

Our declaration of trust prohibits any shareholder other than HRPT, RMR and their affiliates from owning more than 9.8% of our outstanding shares. This provision of the declaration of trust may help us comply with REIT tax requirements. However, this provision will also inhibit a change of control. Our declaration of trust and bylaws contain other provisions that may increase the difficulty of acquiring control of us by means of a tender offer, open market purchases, a proxy fight or otherwise, if the acquisition is not approved by our board of trustees. These other anti-takeover provisions include the following:

•a staggered board of trustees with three separate classes;

•the two-thirds majority shareholder vote required for removal of trustees;

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•the ability of our board of trustees to increase, without shareholder approval, the amount of shares (including common shares) that we are authorized to issue under our declaration of trust and bylaws, and to issue additional shares on terms that it determines;

•advance notice procedures with respect to nominations of trustees and shareholder proposals; and

•the fact that only the board of trustees may call shareholder meetings and that shareholders are not entitled to act without a meeting.

We maintain a rights agreement whereby, in the event a person or group of persons acquires or attempts to acquire 10% or more of our outstanding common shares, our shareholders, other than such person or group, will be entitled to purchase additional shares or other securities or property at a discount. In addition, certain provisions of Maryland law may have an anti-takeover effect. For all of these reasons, our shareholders may be unable to realize a change of control premium for shares they own.

Some of our management agreements and leases limit our ability to sell or finance some of our hotels.

Under the terms of some of our management agreements and leases, we generally may not sell, lease or otherwise transfer the hotels unless the transferee is not a competitor of the manager and the transferee assumes the related management agreements and meets specified other conditions. Our ability to finance or sell our properties, depending upon the structure of such transactions, may require the manager’s consent or the tenant’s consent under our management agreements and leases. If, in these circumstances, the manager or the tenant does not consent, we may be prevented from taking actions which might be beneficial to our shareholders.

Real estate ownership creates risks and liabilities.

Our business is subject to risks associated with real estate acquisitions and ownership, including:

•new hotel supply in our markets;

•catastrophic property and casualty losses, such as losses due to wars, terrorist attacks or natural disasters, some of which may be uninsured;

•defaults and bankruptcies by our managers or tenants;

•the illiquid nature of real estate markets which impairs our ability to purchase or sell our assets rapidly to respond to changing economic conditions;

•management agreements or leases which are not renewed at expiration and may be replaced with management agreements with less favorable terms or relet at lower rents;

•costs that may be incurred relating to maintenance and repair, and the need to make capital expenditures to maintain our properties’ values or due to contractual obligations or changes in governmental regulations, including the Americans with Disabilities Act; and

•environmental hazards at our properties for which we may be liable, including those created by prior owners or occupants, existing tenants, abutters or other persons.

We have substantial debt obligations and may incur additional debt.

At December 31, 2005, we had $960 million in debt outstanding, which was 34% of our total book capitalization. Our note indenture and revolving bank credit facility permit us and our subsidiaries to incur additional debt, including secured debt. If we default in paying any of our debts or honoring our debt covenants, these debts may be accelerated and we could be forced to liquidate our assets for less than the values we would receive in a more orderly process.

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If we issue secured debt or subsidiary debt, such debt will have priority claims on certain of our assets which are senior to our existing debts.

We conduct substantially all of our business through, and substantially all of our properties are owned by, subsidiaries. Consequently, our ability to pay debt service on our outstanding notes and any notes we issue in the future will be dependent upon the cash flow of our subsidiaries and payments by those subsidiaries to us as dividends or otherwise. Our subsidiaries are separate legal entities and have their own liabilities. Payments due on our outstanding notes, and any notes we may issue are, or will be, effectively subordinated to liabilities of our subsidiaries, including guaranty liabilities. Substantially all of our subsidiaries have guaranteed our revolving bank credit facility; none of our subsidiaries guaranty our outstanding notes. In addition, at December 31, 2005, one of our subsidiaries has $4 million of secured debt. Our outstanding notes are, and any notes we may issue will be, also effectively subordinated to our secured debt with regard to our assets pledged to secure our debt.

Our notes may permit redemption before maturity, and our noteholders may be unable to reinvest proceeds at the same or a higher rate.

The terms of our notes may permit us to redeem all or a portion of our outstanding notes after a certain amount of time, or up to a certain percentage of the notes prior to certain dates. Generally, the redemption price will equal the principal amount being redeemed, plus accrued interest to the redemption date, plus any applicable premium. If a redemption occurs, our noteholders may be unable to reinvest the money they receive in the redemption at a rate that is equal to or higher than the rate of return on the applicable notes.

There may be no public market for notes we may issue and one may not develop.

Generally, any notes we may issue will be a new issue for which no trading market currently exists. We may not list our notes on any securities exchange or seek approval for price quotations to be made available through any automated quotation system. There is no assurance that an active trading market for any of our notes will exist in the future. Even if a market does develop, the liquidity of the trading market for any of our notes and the market price quoted for any such notes may be adversely affected by changes in the overall market for fixed income securities, by changes in our financial performance or prospects, or by changes in the prospects for REITs or for the hotel industry generally.

An increase in interest rates would increase our interest costs on variable rate debt and could adversely impact our ability to refinance existing debt or sell assets. Also, interest rate changes often affect the value of dividend paying securities.

Our revolving credit facility requires interest at variable rates and matures in June 2009. At December 31, 2005, we had $35 million outstanding and $715 million available for drawing under our revolving credit facility. If interest rates increase, so will our interest costs, which could adversely affect our cash flow and our ability to pay principal and interest on our debt and our ability to make distributions to our shareholders. Further, rising interest rates could limit our ability to refinance existing debt when it matures. We may from time to time enter into agreements such as interest rate swaps, caps, floors and other interest rate hedging contracts with respect to a portion of our variable rate debt. While these agreements may lessen the impact of rising interest rates on us, they also expose us to the risk that other parties to the agreements will not perform or that the agreements will be unenforceable. In addition, an increase in interest rates could decrease the amount third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions. Increases in interest rates generally often reduce the value of dividend paying securities; accordingly, if interest rates rise the market value of our common and preferred shares may decline.

Item 1B. Unresolved Staff Comments

None.

31

Item 2. Properties

At December 31, 2005, we owned 298 hotels. The following table summarizes certain information about our properties as of December 31, 2005.

	Number of	Undepreciated		Depreciated
Location of Properties	Properties	Carrying Value		Carrying Value
		(in thousands)		(in thousands)
United States
Alabama	4	$	32,551	$	25,990
Arizona	15	149,878		119,229
California	32	512,016		441,610
Colorado	4	36,355		29,570
Connecticut	1	7,284		6,654
Delaware	1	15,180		11,987
Florida	18	191,816		155,953
Georgia	20	197,494		161,038
Hawaii	1	52,737		46,004
Illinois	14	152,616		125,891
Indiana	3	28,693		22,179
Iowa	2	15,554		12,026
Kansas	4	26,276		21,407
Kentucky	1	4,741		3,864
Louisiana	1	28,196		23,779
Maryland	8	88,227		71,022
Massachusetts	13	149,119		119,523
Michigan	12	104,083		87,548
Minnesota	4	34,808		27,895
Missouri	6	87,669		62,829
Nebraska	1	6,027		4,798
Nevada	3	45,122		37,665
New Jersey	11	156,102		130,796
New Mexico	2	21,433		16,969
New York	5	95,078		84,413
North Carolina	16	135,384		108,665
Ohio	5	38,606		31,607
Oklahoma	2	16,591		13,817
Pennsylvania	9	102,595		79,338
Rhode Island	1	12,038		9,097
South Carolina	4	53,949		48,204
Tennessee	9	124,787		100,087
Texas	31	359,636		308,704
Utah	3	59,304		47,662
Virginia	21	220,499		174,561
Washington	6	82,155		67,976
West Virginia	1	9,072		7,290
Wisconsin	1	10,069		7,828
	295	3,463,740		2,855,475
Other
Ontario, Canada	2	33,754		32,633
Puerto Rico	1	129,199		125,578
Total	298	$	3,626,693	$	3,013,686

32

At December 31, 2005, thirteen of our hotels were on leased land. In each case, the remaining term of the ground lease (including renewal options) is in excess of 29 years, and the ground lessors are unrelated to us. Ground rent payable under nine of the ground leases is generally calculated as a percentage of hotel revenues. Eleven of the thirteen ground leases require minimum annual rents ranging from approximately $102,406 to $556,400 per year; future rents under two ground leases have been pre-paid. Generally payments of ground lease obligations are made by our managers or tenants. However, if a manager or tenant did not perform obligations under a ground lease or elected not to renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected hotel. Any pledge of our interests in a ground lease may require the consent of the applicable ground lessor and its lenders.

As described in “Item 1. Business,” on January 6, 2006, we purchased a mixed use complex in Baltimore, Maryland containing a 195 room full service hotel, a 72,042 square foot commercial office building and a 530 space parking garage for $78 million. Also, on January 25, 2006, we purchased eight hotels for $166.2 million. The hotels are located in three states in the United States: California (2), Georgia (2) and Texas (4). One of these hotels is located in part on leased land, subject to a ground lease requiring annual minimum rent of $87,622.

Item 3. Legal Proceedings

In the ordinary course of business we are involved in litigation incidental to our business; however we are not aware of any material pending or threatened legal proceeding affecting us or any of our properties for which we might become liable or the outcome of which we expect to have a material impact on us.

Item 4. Submission of Matters to a Vote of Security Holders

None.

33

PART II

Item 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Securities

Our common shares are traded on the New York Stock Exchange (symbol: HPT). The following table sets forth for the periods indicated the high and low sale prices for our common shares as reported in the NYSE Composite Transactions reports:

2004	High		Low
First Quarter	$	46.40	$	40.40
Second Quarter	46.86		35.56
Third Quarter	43.50		39.06
Fourth Quarter	47.35		41.87

2005	High		Low
First Quarter	$	46.28	$	38.00
Second Quarter	44.72		39.67
Third Quarter	45.04		40.51
Fourth Quarter	43.30		38.42

The closing price of our common shares on the New York Stock Exchange on March 10, 2006, was $46.34 per share.

As of March 10, 2006, there were 1,045 shareholders of record, and we estimate that as of such date there were in excess of 60,000 beneficial owners of our common shares.

Information about distributions paid to common shareholders is summarized in the table below. Common share distributions are generally paid in the quarter following the quarter to which they relate.

	Distributions
	Per Common Share
	2004		2005
First Quarter	$	0.72	$	0.72
Second Quarter	0.72		0.72
Third Quarter	0.72		0.73
Fourth Quarter	0.72		0.73
Total	$	2.88	$	2.90

All common distributions shown in the table above have been paid. Our distributions to our shareholders are generally paid in the quarterly period following the quarter to which the distribution relates. We currently intend to continue to declare and pay common share distributions on a quarterly basis. Distributions are made at the discretion of our board of trustees and depend on our earnings, cash available for distribution, financial condition, capital market conditions, growth prospects and other factors which our board of trustees deems relevant.

34

Item 6. Selected Financial Data

The following table sets forth selected financial data for the periods and dates indicated. This data should be read in conjunction with, and is qualified in its entirety by reference to, management’s discussion and analysis of financial condition and results of operations and the consolidated financial statements and accompanying notes included in this Annual Report on Form 10-K.

	Year Ended December 31,
	2005		2004		2003		2002		2001
	(In thousands, except per share data)
Income Statement Data:
Revenues:
Hotel operating revenues	$	682,541	$	498,122	$	209,299	$	79,328	$	37,982
Rental income	130,731		128,472		217,253		247,488		240,290
FF&E reserve income	19,767		18,147		18,000		20,830		23,388
Interest income	1,373		627		733		1,060		2,217
Gain on lease terminations	—		—		107,516		—		—
Total revenues	834,412		645,368		552,801		348,706		303,877
Expenses:
Hotel operating expenses	476,858		333,818		145,863		50,515		24,375
Interest	65,263		50,393		44,536		42,424		41,312
Depreciation and amortization	131,792		114,883		104,807		96,474		91,395
General and administrative	23,296		19,386		16,800		15,491		14,839
Loss on early extinguishment of debt	—		—		2,582		1,600		—
Loss on asset impairment	7,300		—		—		—		—
Total expenses	704,509		518,480		314,588		206,504		171,921
Income before gain on sale of real estate	129,903		126,888		238,213		142,202		131,956
Gain on sale of real estate	—		203		—		—		—
Net income	129,903		127,091		238,213		142,202		131,956
Preferred distributions	7,656		9,674		14,780		7,572		7,125
Excess of liquidation preference over carrying value of preferred shares	—		2,793		—		—		—
Net income available for common shareholders	$	122,247	$	114,624	$	223,433	$	134,630	$	124,831
Common distributions declared	$	205,162	$	193,523	$	180,242	$	179,504	$	168,447
Weighted average common shares outstanding	69,866		66,503		62,576		62,538		58,986
Per Common Share Data:
Net income available for common shareholders	$	1.75	$	1.72	$	3.57	$	2.15	$	2.12
Distributions per common share	$	2.90	$	2.88	$	2.88	$	2.87	$	2.83
Balance Sheet Data (as of December 31):
Real estate properties, at cost	$	3,626,693	$	3,180,990	$	3,179,507	$	2,762,322	$	2,629,153
Real estate properties, net	3,013,686		2,624,473		2,685,208		2,336,412		2,265,824
Total assets	3,114,607		2,689,425		2,761,601		2,403,756		2,354,964
Debt, net of discount	960,372		697,505		826,126		473,965		464,781
Shareholders’ equity	1,855,455		1,685,873		1,645,528		1,645,020		1,604,519

35

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (dollar amounts in thousands, except per share amounts)

Overview

The following information should be read in conjunction with our consolidated financial statements and accompanying notes included in this Annual Report on Form 10-K.

Hotel Industry Conditions

During 2005, the U.S. hotel industry benefited from an expanding economy and limited new hotel supply. For 2005, nine of our ten combinations of hotels reported increases in revenue per available room, or RevPAR; however, our hotels’ profitability generally remained below 2000 levels. All of our operating agreements and leases contain security features, such as security deposits or guarantees, which are intended to protect payment of minimum returns and rents to us. However, the effectiveness of these various security features to provide uninterrupted payments to us is not assured. If any of our hotel operators, tenants or guarantors default in their payment obligations to us, our revenues and cash flows may decline and our ability to continue to pay distributions may be jeopardized.

2005 Developments

On December 17, 2004, we agreed to purchase 13 hotels from InterContinental for $450,000. The hotels include four full service InterContinental^® hotels, four full service Crowne Plaza^® hotels, three full service Holiday Inn^® hotels and two extended stay Staybridge Suites^® hotels; they have a total of 3,946 rooms/suites and approximately 164,000 square feet of meeting space. The hotels are located in six states in the United States; one InterContinental^® hotel and one Staybridge Suites^® hotel are located in Ontario, Canada; and one InterContinental^® hotel is located in San Juan, Puerto Rico. The $450,000 purchase price includes $25,000 which we have agreed to pay during the three years following the closing in connection with certain improvements to the hotels. On February 16, 2005, we completed the acquisition of 12 of the 13 hotels. On May 31, 2005, we completed the purchase of the final hotel.

 Simultaneously with our purchase of these hotels, we entered a long term combination management agreement for 12 of the hotels and a long term lease for one hotel, the InterContinental^® hotel in San Juan, Puerto Rico, with subsidiaries of InterContinental. The combined annual amount payable to us for all 13 hotels as minimum return under the management agreement and minimum rent under the lease was $34,713 in 2005, increases to $37,688 in 2006, increases to approximately $38,537 in 2007 and increases to approximately $38,962 after the full $450,000 purchase price has been paid. In addition, we are entitled to receive additional return payments, a percentage of gross revenue over threshold amounts at these hotels starting in 2008 and the cash flow remaining after base and incentive management fees are paid. The minimum return under the management agreement and the minimum rent under the lease are calculated and payable in U.S. dollars. Other amounts due under these agreements, with respect to the two hotels located in Canada, may be calculated in Canadian dollars, but will be payable in U.S. dollars. The management agreement and the lease each extend through 2029, and InterContinental has two all or none renewal options for 15 years each. The obligations to pay the minimum return under the management agreement and the minimum rent under the lease are supported by a limited guaranty from InterContinental until the operations at these hotels reach negotiated levels. Further, the obligation to pay the minimum return under the management agreement is also supported by a limited guaranty from the InterContinental subsidiary tenant for the Puerto Rico hotel. The agreements also require a reserve for capital expenditures starting in 2007.

In October 2004, Blackstone Group, or Blackstone, acquired Prime Hospitality Corporation, or Prime, and in January 2005, Blackstone sold Prime’s AmeriSuites^® brand to Hyatt. As part of its AmeriSuites^® acquisition, Hyatt acquired the rights and obligations under our management agreement covering 36 hotels (24 AmeriSuites^® hotels and 12 Prime Hotels^SM) previously managed by Prime. On April 4, 2005, we entered into new management agreements with subsidiaries of Hyatt and Carlson with respect to this portfolio of 36 hotels. The new management agreements split the previous management agreement we had with Prime into two: one with Hyatt for our 24 AmeriSuites^® hotels and one with Carlson for our 12 Prime Hotels^SM. The economic terms of the new management agreements on a combined basis are unchanged from our previous management agreement with Prime, but, because the two

36

management agreements each include a smaller number of hotels and are less diverse, certain security features, including the guarantees from Hyatt and Carlson, have been changed.

During the second quarter of 2005, 11 of our Prime Hotels^SM were rebranded to Carlson hotel brands, including Radisson Hotels & Resorts^®, Country Inns & Suites by Carlson^® and Park Plaza^® Hotels & Resorts. In June 2005, we authorized Carlson to pursue the sale of the 12^th Prime Hotel^SM located in Atlanta, Georgia. In connection with this decision we recorded a $7,300 loss on asset impairment in the second quarter of 2005 to reduce the carrying value of the hotel to its estimated net realizable value less cost to sell. We sold this hotel on September 30, 2005, for $3,227. On November 1, 2005, we acquired a Country Inns & Suites by Carlson^® hotel located in Brooklyn Center, Minnesota with 84 guestrooms from Carlson for $4,100 as a replacement hotel to be added to this combination. Under the terms of our management agreement with Carlson our annual minimum return has been increased by a net $78.

Subsequent Events

On January 6, 2006, we purchased the Harbor Court Complex in the Inner Harbor area of Baltimore, Maryland for $78,000. The Harbor Court Complex is a mixed use development comprised of the five star, five diamond Harbor Court Hotel, a 72,042 square foot office building and a 530 space seven story parking garage. The hotel has 195 guest rooms, including 22 suites, 8,000 square feet of meeting space and a roof top fitness center that includes a tennis court, squash court, indoor pool, aerobics center and spa therapy rooms. Simultaneously with this purchase, we entered into an agreement with InterContinental to manage the Harbor Court Hotel under its InterContinental Hotels & Resorts^® brand. This hotel has been added to the combination agreement for 13 hotels we acquired from InterContinental in 2005 as described above. Our annual minimum return from this expanded combination of hotels will increase by $4,800 in 2006, $5,200 in 2007 and $5,300 per year thereafter. We have agreed to invest up to $2,300 over the next two years in connection with the rebranding of the Harbor Court Hotel as the InterContinental^® Harbor Court Baltimore. In addition to the returns generated by the hotel component of the complex, we will receive the net cash flow from the office and parking parts of the property; and we have entered into a management agreement with RMR to operate the office building and an agreement with an unaffiliated third party to manage the parking garage.

On January 25, 2006, we agreed to purchase nine hotels for $196,200 and to invest $25,100 in these hotels during the three years following closing to fund capital improvements. The hotels include five full service Crowne Plaza^® hotels, one full service Holiday Inn Select^® hotel, two Staybridge Suites^® hotels and one Holiday Inn SunSpree Resort^® hotel; they have a total of 2,712 rooms/suites and approximately 68,000 square feet of meeting space. These hotels are located in three states in the United States and the Holiday Inn SunSpree Resort^® hotel is located in Montego Bay, Jamaica. On January 25, 2006, we completed the acquisition of eight of the nine hotels with an effective date of January 20, 2006. The purchase of the 524 room Holiday Inn SunSpree Resort^® hotel for approximately $30 million was delayed pending Jamaican tax and regulatory approvals, and is expected to close later in 2006. Circumstances may delay this purchase for an extended period or prevent its occurring. Simultaneous with our purchase of these eight hotels, we entered a long term combination management agreement with subsidiaries of InterContinental, and simultaneous with the purchase of the Holiday Inn SunSpree Resort^® we expect to enter a long term lease with a subsidiary of InterContinental. The annual combined amount payable to us for all nine hotels as a minimum return under the management contract and minimum rent under the lease will be $15,800 in 2006, $17,800 in 2007, $18,700 in 2008 and approximately $19,000 thereafter, after the full $25,100 of planned hotel improvements have been funded by us. In addition, we are entitled to receive additional return payments, a percentage of gross revenue over a threshold at these hotels starting in 2008 and the cash flow remaining after the payment of base and incentive management fees. The minimum return under the management agreement and the minimum rent under the lease are calculated and payable in U.S. dollars. Other amounts due under these agreements with respect to the hotel in Jamaica may be calculated in Jamaican dollars but will be payable in U.S. dollars. The management agreement and the lease each extend through 2030, and InterContinental has two all or none renewal options for 15 years each. The obligations to pay the minimum return under the management agreement and the minimum rent under the lease are supported by a limited guaranty from InterContinental until the operations at these hotels reach negotiated levels. Further, the obligation to pay the minimum return under the management agreement will also be supported by a limited guaranty from the InterContinental subsidiary tenant for the hotel in Jamaica. The agreements also require a reserve for capital expenditures starting in 2008.

37

Management Agreements and Leases

As of December 31, 2005, each of our 298 hotels is included in one of ten combinations of hotels which is either leased to one of our wholly owned taxable REIT subsidiaries, or TRSs, and managed by an independent hotel operating company or leased to a third party. At December 31, 2005, we had 189 managed hotels and 109 leased hotels. Our consolidated income statement includes hotel operating revenues and expenses of our managed hotels, and only rental income for leased hotels. After the acquisition of nine hotels in January 2006, described above, we own 307 hotels of which 198 are managed and 109 are leased. Additional information regarding the terms of our management agreements and leases is included in the table on pages 48 and 49.

Results of Operations (dollar amounts in thousands, except per share amounts)

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

	For the year ended December 31,
	2005		2004		Increase (Decrease)			% Increase (Decrease)
	(amounts in dollars, except number of shares)
Hotel operating revenues	$	682,541	$	498,122	$	184,419		37.0%
Rental income:
Minimum rent	126,829		125,669		1,160			0.9%
Percentage rent	3,902		2,803		1,099			39.2%
FF&E reserve income	19,767		18,147		1,620			8.9%
Interest income	1,373		627		746			119.0%
Hotel operating expenses	476,858		333,818		143,040			42.8%
Interest expense	65,263		50,393		14,870			29.5%
Depreciation and amortization	131,792		114,883		16,909			14.7%
General and administrative	23,296		19,386		3,910			20.2%
Loss on asset impairment	7,300		—		7,300			—
Gain on sale of real estate	—		203		(203		)	—
Net income	129,903		127,091		2,812			2.2%
Net income available for common shareholders	122,247		114,624		7,623			6.7%
Weighted average shares outstanding	69,866		66,503		3,363			5.1%
Net income available for common shareholders per common share	$	1.75	$	1.72	$	0.03		1.7%

The increases in hotel operating revenues and expenses were caused by the increase in the number of managed hotels in 2005 due to our February and May 2005 hotel acquisitions and the general increase in hotel revenues due to the improving lodging industry conditions during 2005.

Pro forma annual hotel operating revenues of our 189 managed hotels, which includes revenues for periods prior to our ownership of some of these hotels and for periods when some of the hotels were leased from us by third parties and excludes revenues from the hotel sold on September 30, 2005, were $704,170 for 2005, an increase of 8.5% from pro forma annual hotel operating revenues of $649,222 for 2004. The increase in revenues is attributable primarily to the improving lodging market that has resulted in improved occupancy and average daily room rate at many of our hotels, which was partially offset by lower revenues at our former Prime Hotels^SM during their transition to Carlson branded operations. As described above, we transferred operating responsibility for our Prime Hotels^SM to Carlson on April 4, 2005. During the second quarter of 2005, 11 of these 12 hotels were rebranded with Carlson brands and are currently undergoing renovations which have required some hotel rooms to be taken out of service. We sold the 12^th Prime Hotel^SM in September 2005.

38

Pro forma annual hotel operating expenses of our managed hotels, which includes expenses for periods prior to our ownership of some of these hotels and for periods when some of the hotels were leased from us by third parties and excludes revenues from the hotel sold on September 30, 2005, were $504,525 for 2005, an increase of 5.1% from pro forma annual hotel operating expenses of $480,000 for 2004. This increase is primarily a result of higher hotel occupancies and increases in the cost of labor and utilities.

Certain of our managed hotels had net operating results that were $2,491 and $10,595 less than the minimum returns due to us in 2005 and 2004, respectively. These amounts are reflected in our consolidated statement of income as a net reduction to hotel operating expenses in these years because the minimum returns were funded by our managers.

The increase in minimum rental income is primarily a result of the initiation of a new lease for our hotel in San Juan, Puerto Rico in February 2005, and the increase in minimum rent resulting from our funding of improvements at certain of our leased hotels in 2005 and 2004. This increase was partially offset by the elimination of $5,222 of minimum rent for seven of our hotels which were leased to third parties for a portion of 2004 but are now managed for our account. The increase in percentage rental income is the result of increased sales at our leased hotels.

FF&E reserve income represents amounts paid by our tenants into restricted accounts owned by us, the purpose of which is to accumulate funds for future capital expenditures. The terms of our leases require these amounts to be calculated as a percentage of total sales at our hotels. The increase in FF&E reserve income is primarily due to increased levels of hotel sales in 2005 versus 2004 at our leased hotels. This increase was partially offset by the elimination of FF&E reserve income for seven hotels which were leased to third parties for a portion of 2004, but are now managed for our account. The amounts which are escrowed as FF&E reserves for our managed hotels and for leased hotels where the FF&E reserve is owned by our tenants are not reported as FF&E reserve income in our consolidated statement of income.

The increase in interest income is due to higher average cash balances and higher average interest rates during 2005.

The increase in interest expense is primarily due to higher average borrowings, which was partially offset by a lower weighted average interest rate during 2005 than in 2004.

The increase in depreciation and amortization is due principally to the depreciation of 14 hotels acquired during 2005 and the impact of the purchases in 2005 and 2004 of depreciable assets with funds from FF&E reserve accounts owned by us. This increase was offset to some extent by the sale of hotels in April 2004 and September 2005 and the retirement of fully depreciated assets of $71,089 and $50,619 during 2005 and 2004, respectively.

The increase to general and administrative expense is due principally to the impact of additional hotel investments during 2005.

We recorded a $7,300 loss on asset impairment to reduce the carrying value of our Prime Hotel^SM in Atlanta, Georgia to its net realizable value less cost to sell in the 2005 second quarter. We sold this hotel on September 30, 2005, for $3,227.

We recorded a $203 gain on the sale of a Summerfield Suites^® hotel located in Buckhead, Georgia in the 2004 second quarter.

Our 2004 income available to common shareholders was reduced by $2,793 as a result of our redemption of our Series A preferred shares, which amount reflects the excess of the redemption payments over the carrying value of these preferred shares before their redemption.

The increases in net income, net income available for common shareholders and net income available for common shareholders per common share were primarily due to the investment and operating activities discussed above. The increase in net income available for common shareholders and net income available for common

39

shareholders per common share were also impacted by the reduction in 2005 of preferred dividends and the preferred share redemption costs due to the redemption of our Series A preferred shares in April 2004. On a per share basis, the percentage increase in net income available for common shareholders was lower due to our issuance and sale of 4.7 million common shares in June 2005.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

	For the year ended December 31,
	2004		2003		Increase (Decrease)			% Increase (Decrease)
	(amounts in dollars, except number of shares)
Hotel operating revenues	$	498,122	$	209,299	$	288,823		138.0%
Rental income:
Minimum rent	125,669		216,125		(90,456		)	(41.9)%
Percentage rent	2,803		1,128		1,675			148.5%
FF&E reserve income	18,147		18,000		147			0.8%
Interest income	627		733		(106		)	(14.5)%
Gain on lease terminations	—		107,516		(107,516		)	—
Hotel operating expenses	333,818		145,863		187,955			128.9%
Interest expense	50,393		44,536		5,857			13.2%
Depreciation and amortization	114,883		104,807		10,076			9.6%
General and administrative	19,386		16,800		2,586			15.4%
Loss on early extinguishment of debt	—		2,582		(2,582		)	—
Gain on sale of real estate	203		—		203			—
Net income	127,091		238,213		(111,122		)	(46.6)%
Net income available for common shareholders	114,624		223,433		(108,809		)	(48.7)%
Weighted average shares outstanding	66,503		62,576		3,927			6.3%
Net income available for common shareholders per common share	$	1.72	$	3.57	(1.85		)	(51.8)%

The increases in hotel operating revenues and expenses were caused by the increase in the number of managed hotels in 2004 due to: (i) our July 2003 acquisition of 16 hotels and the initiation of a management agreement for these hotels; (ii) the change of 13 hotels from leased to managed hotels after the 2003 first quarter; (iii) the initiation of a new management agreement on December 31, 2003, for 64 hotels previously leased to Candlewood Hotel Company, or Candlewood, and for 12 hotels purchased from Candlewood on that day; (iv) the initiation of a new management agreement on January 1, 2004, for 24 hotels previously leased to Prime; (v) the initiation of management agreements and the termination of leases for 27 hotels previously leased to Wyndham International, Inc., or Wyndham, in the second quarter of 2003; and (vi) the general increase in hotel revenues due to the improving lodging industry conditions during 2004.

Pro forma annual hotel operating revenues of our 177 managed hotels, which includes revenues for periods prior to our ownership of some of these hotels and for periods when some of the hotels were leased from us by third parties, were $510,124 in 2004, an increase of 1.1% from pro forma annual hotel operating revenues of $504,714 in 2003. The increase in revenues is attributable primarily to the strengthening lodging market that resulted in improved occupancy and average daily room rate at many of our hotels offset by lower revenues at our former Summerfield Suites by Wyndham^® and Wyndham^® hotels, which were in the process of being rebranded during 2004 as Staybridge Suites^® and Prime Hotels^SM, respectively.

Pro forma annual hotel operating expenses for our managed hotels, which includes expenses for periods prior to our ownership of some of these hotels and for periods when some of the hotels were leased from us by third parties, were $351,221 in 2004, a decrease of 0.8% from pro forma annual hotel operating expenses of $354,033 in

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2003. This decrease is due primarily to lower franchise related costs at certain of our rebranded hotels partially offset by increased labor costs.

Certain of our managed hotels had net operating results that were $10,595 and $6,922 less than the minimum returns due to us in 2004 and 2003, respectively. These amounts have been reflected in our consolidated statement of income as a net reduction to hotel operating expenses in each year because the minimum returns were funded by our managers.

The decrease in minimum rental income is primarily a result of the elimination of $94,313 of minimum rent for 128 of our hotels which were previously leased to third parties but are now managed for our account. This decrease was partially offset by increased minimum rent resulting from our funding of improvements at certain of our leased hotels in 2004 and 2003. Percentage rental income increased as a result of higher sales at our leased hotels in 2004 versus 2003.

The increase in FF&E reserve income is primarily due to increased levels of hotel sales in 2004 versus 2003 at certain of our recently modernized Courtyard by Marriott^® hotels. This increase was partially offset by six hotels which were changed from leased to managed hotels during 2003 and seven additional hotels which were changed from leased to managed hotels in June 2004.

The decrease in interest income is due to a lower average cash balance, offset to some extent by a higher average interest rate during 2004 than in 2003.

We recorded a $107,516 gain on lease terminations in 2003 as a result of the termination of our leases with Wyndham and Candlewood.

The increase in interest expense is primarily due to higher average borrowings and a higher weighted average interest rate during 2004.

The increase in depreciation and amortization is due principally to the depreciation of 35 hotels acquired during 2003 and the impact of the purchases in 2003 and 2004 of depreciable assets with funds from FF&E reserve accounts owned by us. This is offset to some extent by the sale of one hotel in 2004 and the retirement of fully depreciated assets of $50,619 and $36,418 during 2004 and 2003, respectively.

The increase to general and administrative expense is due principally to the impact of additional hotel investments during 2004 and 2003 and diligence costs of approximately $500 incurred in 2004 in connection with a failed potential acquisition.

In 2003, we recorded an expense of $2,582 to write off the unamortized deferred financing costs associated with $150,000 of senior notes we redeemed.

We recorded a $203 gain on the sale of a Summerfield Suites by Wyndham^® hotel located in Buckhead, Georgia in the 2004 second quarter.

Our 2004 income available to common shareholders was reduced by $2,793 as a result of our redemption of our Series A preferred shares, which amount reflects the excess of the redemption payments over the carrying value of these preferred shares before their redemption.

The decreases in net income, net income available for common shareholders and net income available for common shareholders per common share were primarily due to the gain on lease terminations recorded in 2003 and the other investment and operating activities discussed above. The percentage decrease in net income available for common shareholders per common share was higher due to our sale of an aggregate of 4.6 million common shares in February and March 2004.

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Liquidity and Capital Resources

Our Operators and Tenants

As of March 10, 2006, all 307 of our hotels are operated under management agreements or leases with unrelated third party hotel operating companies. All costs of operating and maintaining our hotels are paid by the third party hotel managers as agents for us or by third party tenants for their own account. These third parties generally derive their funding for hotel operating expenses, FF&E reserves, and returns and rents due us from hotel operating revenues and, to the extent that these parties fund our minimum returns and minimum rents under their guarantees to us, from their separate resources.

We define coverage for each of our combination hotel management agreements or leases as total hotel sales minus all expenses which are not subordinated to the minimum returns and minimum rents due to us and the required FF&E reserve contributions, divided by the aggregate minimum payments to us. More detail regarding coverage, guarantees and other security features of our operating agreements is presented in the table on pages 48 and 49. Of our ten operating agreements in place during 2005, seven hotel combinations, representing 237 hotels, generated coverage of at least 1.0x during 2005. The remaining three combinations, representing 61 hotels, generated coverages of 0.90x to 0.99x in 2005.

One hundred eighty-two (182) hotels, 60% of our total investments at cost, in seven combinations are operated under management agreements or leases which are subject to full or limited guarantees. These guarantees may provide us with continued payments if the total hotel sales less total hotel expenses and required FF&E reserve payments fail to equal or exceed guaranteed amounts due to us. Our managers and tenants or their affiliates may also supplement cash flow from our hotels in order to make payments to us and preserve their rights to continue operating our hotels. Guarantee or supplemental payments to us, if any, made under any of our management agreements or leases, do not subject us to repayment obligations but, under some of our agreements, these guarantee or supplemental payments may be recovered by the manager or tenant from the future cash flows from our hotels after our future minimum returns and minimum rents are paid.

As of March 10, 2006, all payments due, including those payments due under management agreements or leases whose hotels generated less than 1.0x coverage during 2005, are current. However, the effectiveness of our various security features to provide uninterrupted payments to us is not assured. If any of our hotel operators, tenants or guarantors default in their payment obligations to us, our revenues and cash flows may decline.

Our Operating Liquidity and Capital Resources

Our principal source of funds for current expenses and distributions to shareholders are minimum returns from our managed hotels and minimum rents from our leased properties. We receive minimum returns and minimum rents from our managers and tenants monthly. We receive additional returns, percentage returns and rents and our share of the operating profits of our managed hotels after payment of all management fees and other deductions either monthly or quarterly. This flow of funds has historically been sufficient for us to pay our operating expenses, interest and distributions to shareholders. We believe that our operating cash flow will be sufficient to meet our operating expenses, interest and distribution payments for the foreseeable future.

We maintain our status as a REIT under the Internal Revenue Code by meeting certain requirements. As a REIT, we do not expect to pay federal income taxes on the majority of our income. In 1999, federal legislation known as the REIT Modernization Act, or the RMA, was enacted and became effective on January 1, 2001. The RMA, among other things, allows a REIT to lease hotels to a TRS if the hotel is managed by an independent third party. The income realized by our TRS in excess of the rent it pays to us is subject to income tax at corporate tax rates. As, and if, the financial performance of the hotels operated for the account of our TRS improves, these taxes may become material, but the anticipated taxes are not material to our consolidated financial results at this time.

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Our Investment and Financing Liquidity and Capital Resources

Various percentages of total sales at most of our hotels are escrowed as FF&E reserves to fund future capital improvements at our hotels. As of December 31, 2005, there was approximately $30,115 on deposit in these escrow accounts, of which $29,063 was held directly by us and reflected on our balance sheet as restricted cash. The remaining $1,052 is held in an account owned by one of our tenants and is not reflected on our balance sheet; but we have security and remainder interests in the account owned by this tenant. During 2005, $35,115 was contributed to these accounts by our managers and tenants. Our operating agreements generally provide that, if necessary, we will provide our managers and tenants FF&E funding in excess of escrowed reserves. To the extent we make such fundings, our annual minimum returns or minimum rent generally increases by a percentage of the amount we fund. During 2005, we made $45,390 of such fundings. During 2005, $89,335 was spent to renovate and refurbish our hotels.

During 2005, we funded $13,726 for improvements to our Marriott hotel portfolios using cash on hand and borrowings under our revolving credit facility. We expect to fund $26,669 for improvements to four of our Marriott hotel portfolios in 2006 with funds from existing cash balances or borrowings under our credit facility. Our minimum annual rent for these hotels is increased by approximately 10% of the amounts we fund, which amounts are in addition to recurring FF&E reserve funding from hotel operations.

Pursuant to our agreement with InterContinental for management of 15 Staybridge Suites^® hotels (part of a 30 hotel combination), we agreed to fund $20,000 for rebranding costs and other capital improvements. As part of this agreement, InterContinental agreed to provide us with a $20,000 deposit to secure its obligations under the management agreement that we will not escrow. During the first quarter of 2005, the final $10,000 of these fundings occurred. Our funding to InterContinental and its funding of the deposit to us were simultaneous.

Pursuant to the agreement we entered into with Hyatt in April 2005 for management of 24 hotels, we agreed to fund $8,000 to Hyatt for rebranding of the hotels to the new Hyatt Place^TM brand and other capital improvements. As of December 31, 2005, $4,845 has been funded. We have also agreed to provide additional funding to Hyatt for the rebranding of the hotels. To the extent our fundings exceed $8,000, the minimum return payable by Hyatt to us will increase as these funds are advanced. We expect to make additional fundings of approximately $35,270 in 2006 using cash on hand or borrowings under our revolving credit facility.

Pursuant to the agreement we entered into with Carlson in April 2005 for management of 12 hotels, we agreed to fund $12,000 for rebranding costs and other capital improvements. We have also agreed to provide additional funding to Carlson for rebranding and refurbishment of the hotels. To the extent our fundings exceed $12,000, the minimum return payable by Carlson to us will increase as these funds are advanced. As of December 31, 2005, $21,664 has been funded. We expect to make additional fundings totaling $15,385 through June 2006 with funds from existing cash balances or borrowings under our credit facility.

In order to fund acquisitions and to meet cash needs that may result from timing differences between our receipt of returns and rents and our desire or need to make distributions or pay operating expenses, we maintain a revolving credit facility with a group of commercial banks. On May 23, 2005, we amended and restated our unsecured revolving credit facility to increase the maximum borrowing amount from $350,000 to $750,000 and to extend the maturity date to June 2009. Our amended and restated credit facility includes provisions whereby the maturity date may be extended by one year upon payment of an additional fee and the maximum borrowing may be expanded to up to $1,500,000 in certain circumstances. Several additional amendments were made to the terms of our credit facility: the interest rate on drawings under the credit facility was reduced from LIBOR plus 135 basis points to LIBOR plus 80 basis points, subject to adjustments based on changes to our credit ratings; and certain financial and other covenants in the credit facility were also amended to reflect current market conditions. In October 2005, the credit ratings of our senior unsecured debt obligations were raised to “BBB” and “Baa2” from “BBB-” and “Baa3” by Standard & Poor’s Rating Services and Moody’s Investors Service, respectively. The interest rate on drawings under the credit facility was reduced to LIBOR plus 65 basis points as a result of these ratings increases. Under this credit facility funds may be drawn, repaid and redrawn until maturity, and no principal repayment is due until maturity. As of December 31, 2005, we had $35,000 outstanding on our credit facility.

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At December 31, 2005, we had $18,568 of cash and cash equivalents and $715,000 available on our revolving credit facility. We expect to use existing cash balances, borrowings under our credit facility or other lines of credit and net proceeds of offerings of equity or debt securities to fund future property acquisitions.

As described above, on December 17, 2004, we announced our agreement to purchase 13 hotels from InterContinental for $450,000. We acquired 12 of the hotels on February 16, 2005 and the remaining hotel on May 31, 2005, for $425,000 using proceeds from the senior notes issuance described below and borrowings under our revolving credit facility. The $450,000 purchase price includes $25,000 which we have agreed to pay during the three years following closing in connection with certain improvements to the hotels. We paid $10,000 of this amount in December 2005 and expect to pay the remaining balance in 2006 and 2007 with funds from existing cash balances or borrowings under our credit facility.

On January 6, 2006, we acquired the Harbor Court Complex in Baltimore, Maryland for $78,000 using cash on hand and borrowings under our revolving credit facility.

On January 25, 2006, we announced our agreement to purchase nine hotels for $196,200. As of March 10, 2006, we have acquired eight of these nine hotels for approximately $166,200 using borrowings under our revolving credit facility. We expect to complete the purchase of the final hotel for approximately $30,000 later in 2006, using existing cash balances or borrowings under our revolving credit facility.

Our term debt maturities (other than our revolving credit facility) are as follows: $150,000 in 2008; $50,000 in 2010; $125,000 in 2012, $300,000 in 2013 and $300,000 in 2015. As of December 31, 2005, we had one mortgage note we assumed in connection with our acquisition of a hotel with a principal balance of $3,766. This mortgage note requires monthly payments of principal and interest of $32 and is expected to have a principal balance of $3,326 at maturity in 2011. The mortgage note became prepayable at a premium to face value on September 1, 2005. None of our other debt obligations require principal or sinking fund payments prior to their maturity date.

On March 1, 2005, June 1, 2005, September 1, 2005 and December 1, 2005, we declared distributions of $0.5546875 per Series B preferred share with respect to each of the first, second, third and fourth quarters of 2005, respectively, and paid them to shareholders on April 15, 2005, July 15, 2005, October 17, 2005 and January 17, 2006. On April 7, 2005 and July 7, 2005, we declared distributions of $0.72 per common share with respect to each of the first and second quarters of 2005, respectively, and on October 6, 2005 and January 12, 2006, we declared distributions of $0.73 per common share with respect of each of the third and fourth quarters of 2005, respectively, and paid them to shareholders on May 19, 2005, August 18, 2005, November 17, 2005 and February 16, 2006. All of these distributions were funded using cash on hand and borrowings under our revolving credit facility.

On February 15, 2005, we issued $300,000 of 5.125% senior notes due 2015. Net proceeds after underwriting and other offering expenses were approximately $297,192. As described above, these proceeds were used to partially fund the acquisition of 13 hotels from InterContinental in February and May 2005.

On June 5, 2005, we sold 4,500,000 of our common shares at a price of $44.39 per share in a public offering. On June 24, 2005, we sold an additional 200,000 common shares at a price of $44.39 pursuant to an over allotment option granted to the underwriters. Net proceeds from both these sales, after underwriting and other offering expenses, were $199,233. We used these proceeds to reduce borrowings outstanding under our revolving credit facility.

When amounts are outstanding on our revolving credit facility and, as the maturity dates of our credit facility and term debt approach over the longer term, we will explore alternatives for the repayment of amounts due. Such alternatives in the short term and long term may include incurring additional long term debt and issuing new equity securities. As of December 31, 2005, we had $1,578,439 available on our shelf registration. An effective shelf registration allows us to issue public securities on an expedited basis, but it does not assure that there will be buyers for those securities. Although there can be no assurance that we will consummate any debt or equity security offerings or other financings, we believe we will have access to various types of financing, including investment grade debt or equity securities offerings, with which to finance future acquisitions and to pay our debt and other obligations.

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As of December 31, 2005, our contractual obligations were as follows:

	Payment due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Debt Obligations	$	963,766	$	66	$	150,148	$	85,176	$	728,376
Purchase Obligation (1)	15,000		10,000		5,000		—		—
Ground Lease Obligations (2)	73,709		1,994		3,988		3,568		64,159
Capital improvements (3)	77,324		77,324		—		—		—
Total	$	1,129,799	$	89,384	$	159,136	$	88,744	$	792,535

(1)On December 17, 2004, we announced our agreement to purchase 13 hotels from InterContinental. This remaining balance of our negotiated purchase price is to fund capital improvements over the course of the next two years.

(2)Thirteen of our hotels are on leased land. In each case the ground lessors are unrelated to us. Generally, payments of ground lease obligations are made by our managers or tenants. However, if a manager or tenant fails to perform obligations under a ground lease or elects not to renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected hotel.

(3)Represents amounts we expect to fund in addition to recurring FF&E reserve funding from hotel operations.

As of December 31, 2005, we had no off-balance sheet arrangements, commercial paper, derivatives, swaps, hedges, guarantees, joint ventures or partnerships. As of December 31, 2005, our secured debt obligations were limited to one mortgage note of $3,766 secured by a single property. None of our debt documentation requires us to provide collateral security in the event of a ratings downgrade.

Debt Covenants

Our debt obligations at December 31, 2005, were our revolving credit facility, our $925,000 of publicly issued term debt and our $3,766 mortgage note. Our public debt is governed by an indenture. This indenture and related supplements and our credit facility agreement contain a number of financial ratio covenants which generally restrict our ability to incur debts, including debts secured by mortgages on our properties in excess of calculated amounts, require us to maintain a minimum net worth, restrict our ability to make distributions under certain circumstances and require us to maintain other ratios. As of December 31, 2005, we were in compliance with all of our covenants under our indenture and its supplements and our credit facility agreement.

Neither our indenture and its supplements nor our bank credit facility contain provisions for acceleration which could be triggered by our debt ratings. However, under our credit facility agreement, our senior debt rating is used to determine the fees and interest rate applied to borrowings.

Our public debt indenture and its supplements contain cross default provisions to any other debts of $20,000 or more. Similarly, a default on our public debt indenture would be a default on our credit facility.

Related Party Transactions

RMR originates and presents investment opportunities to our board and provides administrative services to us under an agreement. RMR is compensated at an annual rate equal to 0.7% of our average real estate investments, as defined, up to the first $250,000 and 0.5% thereafter, plus an incentive fee based upon increases in cash available for distribution per share, as defined. The incentive fee payable to RMR is paid in common shares. Aggregate fees earned by RMR during 2005 for services were $19,127, which includes an incentive fee of $1,397 which we plan to pay later in 2006, through the issuance of 33,973 of our common shares. RMR also provides the internal audit function for us and for other publicly traded companies to which it provides management or other services. We pay a pro rata share of RMR’s costs in providing that function. Our audit committee composed only of independent trustees approves the identity and salary of the individual serving as our director of internal audit, as well as the pro rata share of the costs which we pay. As described above, on January 6, 2006, we entered into a management agreement with RMR to operate the office building component of our Harbor Court Complex. Fees paid to RMR under this management agreement are based on a formula, generally 3% of gross collected rents as a property management fee and 5% of

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gross construction costs as a construction management fee. Prior to October 1, 2005, RMR was beneficially owned by Messrs. Barry Portnoy and Gerard Martin, each a managing trustee and a member of our board of trustees.  Effective October 1, 2005, Messrs. Barry Portnoy and his son, Adam Portnoy, acquired Mr. Martin’s beneficial ownership in RMR. Mr. Adam Portnoy is an executive officer of RMR and the Executive Vice President of HRPT. Mr. Martin remains a director of RMR and, together with Mr. Barry Portnoy, continues to serve as one of our managing trustees.  All transactions between us and RMR are approved by our independent trustees.

Critical Accounting Policies

Our critical accounting policies are those that have the most impact on the reporting of our financial condition and results of operations and those requiring significant judgments and estimates. We believe that our judgments and assessments are consistently applied and produce financial information that fairly presents our results of operations. Our four most critical accounting policies concern our investments in hotels and are as follows:

Classification of Leases. Certain of our hotel investments are leased on a triple net basis, pursuant to non-cancelable, fixed term, operating leases. Each time we enter a new lease or materially modify an existing lease we evaluate its classification as either a capital lease or operating lease. The classification of a lease as capital or operating affects the carrying value of a property, as well as our recognition of rental payments as revenue. These evaluations require us to make estimates of, among other things, the remaining useful life and market value of a leased hotel, appropriate present value discount rates and future cash flows. Incorrect assumptions or estimates may result in misclassification of our leases.

Allocation of Purchase Price and Recognition of Depreciation Expense. The acquisition cost of each hotel investment is allocated to various property components such as land, buildings and furniture, and each component generally has a different useful life. For hotels acquired subsequent to June 1, 2001, the effective date of Statement of Financial Accounting Standards No. 141, “Business Combinations”, we allocate the value of real estate acquired among building, land, furniture, fixtures and equipment, and, if applicable, the value of in-place leases, the fair market value of above or below market leases and customer relationships. Acquisition cost allocations and the determination of the useful lives are based on our estimates or, under some circumstances, studies commissioned from independent experts. We compute related depreciation expense using the straight line method over estimated useful lives of up to 40 years for buildings and improvements, and up to 12 years for personal property. The value of intangible assets is amortized over the term of the respective lease or the affected contract. The allocated cost of land is not depreciated. Inappropriate allocation of acquisition costs or incorrect estimates of useful lives could result in depreciation and amortization expenses which do not appropriately reflect the allocation of our capital expenditures over future periods required by accounting principles generally accepted in the United States.

Impairment of Assets. We periodically evaluate our hotel investments for impairment indicators. These indicators may include weak or declining operating profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life or market or industry changes that could permanently reduce the value of our investments. If indicators of impairment are present, we evaluate the carrying value of the related investment by comparing it to the expected future undiscounted cash flows to be generated from that investment. If the sum of these expected future cash flows is less than the carrying value, we reduce the net carrying value of the property to its estimated fair value. Estimated fair value is determined through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation techniques. This analysis requires us to judge whether indicators of impairment exist and to estimate likely future cash flows. If we misjudge or estimate incorrectly or if future operating profitability, market or industry factors differ from our expectations we may record an impairment charge which is inappropriate or fail to record a charge when we should have done so, or the amount of such charges may be inaccurate.

Variable Interest Entities. In January 2003, the Financial Accounting Standards Board, or FASB, issued FASB Interpretation No. 46, “Consolidation of Variable Interest Entities”, or FIN 46, that was effective for all enterprises with variable interest entities created after January 31, 2003. In December 2003, FASB issued a revised FIN 46, which provided for the deferral of the effective date of the interpretation to January 1, 2004, for variable interest entities created prior to January 31, 2003. Under FIN 46, if an entity is determined to be a variable interest entity, it must be consolidated by the primary beneficiary. The primary beneficiary is the enterprise that absorbs the majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both.

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Generally, expected losses and expected residual returns are the expected negative and positive variability, respectively, in the fair value of the variable interest entities’ net assets. When our TRS enters a new operating agreement or materially modifies an existing operating agreement we are required to assess if we are or continue to be the primary beneficiary. This assessment requires us to make estimates of the future cash flows of our TRS. Incorrect assumptions or estimates of, among other things, occupancy, average daily room rate and operating expenses of our hotels may result in an inaccurate determination of the primary beneficiary. The adoption of FIN 46 had no effect on our financial statements.

These policies involve significant judgments based upon our experience, including judgments about current valuations, ultimate realizable value, estimated useful lives, salvage or residual values, the ability of our tenants and operators to perform their obligations to us, and the current and likely future operating and competitive environments in which our hotels operate. In the future we may need to revise our assessments to incorporate information which is not now known, and such revisions could increase or decrease our depreciation expense related to hotels we own, result in the classification of our leases as other than operating leases or decrease the carrying values of our assets.

Property Management Agreements, Leases and Operating Statistics

As of March 10, 2006, we owned 307 hotels which are grouped into eleven combinations and managed by or leased to separate affiliates of hotel operating companies including InterContinental, Marriott, Host Marriott Corporation, or Host, Barcelo Crestline Corporation, or Barcelo Crestline, Hyatt, Carlson and Homestead.

The tables on the following pages summarize the key terms of our leases and management agreements as of March 10, 2006, and include statistics reported to us or derived from information reported to us by our managers and tenants. These statistics include occupancy, average daily rate, or ADR, revenue per day per available room, or RevPAR, and coverage of our minimum returns or minimum rents. We consider these statistics and the management agreement or lease security features also presented in the tables on the following pages, to be important measures of our managers’ and tenants’ success in operating our hotels and their ability to continue to pay us. However, none of this third party reported information is a direct measure of our financial performance and none of it has been independently verified by us.

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Hotel Brand:	Courtyard by Marriott®	Residence Inn by Marriott®	Marriott®/ Residence Inn by Marriott®/ Courtyard by Marriott®/ TownePlace Suites by Marriott®/ SpringHill Suites by Marriott®	Residence Inn by Marriott®/ Courtyard by Marriott®/ TownePlace Suites by Marriott®/ SpringHill Suites by Marriott®	Homestead Studio Suites®	Staybridge Suites®
Number of Hotels:	53	18	35	19	18	30
Number of Rooms / Suites:	7,610	2,178	5,382	2,756	2,399	3,694
Number of States:	24	14	15	14	5	16
Tenant:	Subsidiary of Host Subleased to Subsidiary of Barcelo Crestline.	Subsidiary of Host Subleased to Subsidiary of Barcelo Crestline.	Our TRS.	Subsidiary of Barcelo Crestline.	Subsidiary of Homestead.	Our TRS.
Manager:	Subsidiary of Marriott.	Subsidiary of Marriott.	Subsidiaries of Marriott.	Subsidiaries of Marriott.	Subsidiary of Homestead.	Subsidiary of InterContinental.
Investment (000s) (1):	$560,635	$187,236	$462,332	$274,222	$145,000	$415,708
Security Deposit (000s):	$50,540	$17,220	$36,204	$28,508	$15,960	$36,872(8)
End of Current Term:	2012	2010	2019	2015	2015	2023
Renewal Options (2):	3 for 12 years each.	1 for 10 years, 2 for 15 years each.	2 for 15 years each.	2 for 10 years each.	2 for 15 years each.	2 for 12.5 years each.
Annual Minimum Return / Minimum Rent (000s) (3):	$55,951	$18,705	$47,986	$28,508	$15,960	$36,097
Additional Return:	—	—	$1,173(4)	—	—	—
Percentage Return / Rent (5):	5.0% of revenues above 1994/95 revenues.	7.5% of revenues above 1996 revenues.	7.0% of revenues above 2000/01 revenues.	7.0% of revenues above 1999/2000 revenues.	10.0% of revenues above 1999/2000 revenues.	7.5% of revenues above 2004/06 revenues.
Return / Rent Coverage (6)(7):
Year ended 12/31/05:	1.41x	1.13x	1.03x	0.99x	1.46x	0.91x
Year ended 12/31/04:	1.29x	1.00x	0.87x	0.85x	1.21x	0.77x
Other Security Features:	HPT controlled lockbox with minimum balance maintenance requirement; subtenant and subtenant parent minimum net worth requirement.	HPT controlled lockbox with minimum balance maintenance requirement; subtenant and subtenant parent minimum net worth requirement.	—	Tenant minimum net worth requirement.	Homestead parent guarantee and $15,960 letter of credit.	Limited guarantee provided by InterContinental.

(1)Amounts exclude expenditures made from FF&E reserves funded from hotel operations, but includes amounts funded by us separately from hotel operations.

(2)Renewal options may be exercised by the manager or tenant for all, but not less than all, of the hotels within each combination of hotels.

(3)Each management agreement or lease provides for payment to us of an annual minimum return or minimum rent, respectively. Management fees are generally subordinated to these minimum payment amounts and certain minimum payments are subject to full or limited guarantees.

(4)This agreement provides for annual additional return payment to us of $1,173 to the extent of available cash flow after payment of operating costs, funding of the FF&E reserve and payment of our minimum return and percentage return.

(5)Certain of our management agreements and leases provide for payment to us of a percentage of increases in total hotel sales over base year levels. Percentage returns under our management agreements are payable to us only to the extent of available cash flow, as defined in the agreements. The payment of percentage rent under our leases is not subject to available cash flow.

(6)We define coverage as total hotel sales minus all expenses which are not subordinated to minimum payments to us and the required FF&E reserve contributions (which data is provided to us by our operators or tenants), divided by the minimum returns or minimum rent payments due to us.

(7)For the hotels managed by Marriott, the data presented is for the comparable fiscal years ended December 30, 2005, and December 31, 2004.

(8)The single $36,872 deposit secures InterContinental’s obligations under the Staybridge Suites^® portfolio, the InterContinental^® / Crowne Plaza^® / Holliday Inn^® / Staybridge Suites^® portfolio and the Crowne Plaza^® / Holiday Inn^® / Staybridge Suites^® portfolio.

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Hotel Brand:	Candlewood Suites ®	InterContinental® / Crowne Plaza®/ Holiday Inn®/ Staybridge Suites® (1)	Crowne Plaza®/ Holiday Inn®/ Staybridge Suites® (2)	AmeriSuites®	Radisson® Hotels & Resorts/ Park Plaza® Hotels & Resorts/ Country Inns & Suites by Carlson®	Total/ Range/ Average (all investments) (1)(2)
Number of Hotels:	76	14	8	24	12	307
Number of Rooms / Suites:	9,220	4,141	2,188	2,929	2,262	44,759
Number of States:	29	7 plus Ontario and Puerto Rico	3	14	7	38 plus Ontario and Puerto Rico
Tenant:	Our TRS.	Our TRS and a subsidiary of InterContinental.	Our TRS.	Our TRS.	Our TRS.
Manager:	Subsidiary of InterContinental.	Subsidiaries of InterContinental.	Subsidiaries of InterContinental.	Subsidiary of Hyatt.	Subsidiary of Carlson.
Investment (000s) (3):	$590,250	$503,000	$166,200	$243,350	$202,735	$3,750,668
Security Deposit (000s):	—	$36,872 (4)	$36,872 (4)	—	—	$185,304
End of Current Term:	2028	2029	2030	2030	2030	2010-2030 (average 16 years)
Renewal Options (5):	2 for 15 years each.	2 for 15 years each.	2 for 15 years each.	2 for 15 years each.	2 for 15 years each.
Annual Minimum Return / Minimum Rent (000s) (6):	$50,000	$42,488	$13,296	$17,000	$10,732	$336,723
Additional Return:	$10,000(7)	$3,458(8)	$1,269(9)	50% of cash flow in excess of minimum return. (10)	50% of cash flow in excess of minimum return. (10)	$15,900
Percentage Return / Rent (11):	7.5% of revenues above 2006 revenues.	7.5% of revenues above 2006 revenues.	7.5% of revenues above 2006 revenues.	—	—
Return / Rent Coverage (12):
Year ended 12/31/05:	1.20x	1.29x	1.34x	1.03x	0.90x	0.90x – 1.46x
Year ended 12/31/04:	1.00x	0.95x	1.06x	0.91x	1.49x	0.77x – 1.49x
Other Security Features:	Limited guarantee provided by InterContinental.	Limited guarantee provided by InterContinental.	Limited guarantee provided by InterContinental.	Limited guarantee provided by Hyatt.	Limited guarantee provided by Carlson.

(1)Amounts give effect to the acquisition of a hotel on January 6, 2006.

(2)Amounts give effect to the acquisition of eight hotels with an effective date of January 20, 2006. Amounts exclude one additional Holiday Inn SunSpree Resort^® in Montego Bay, Jamaica with 524 rooms, which we expect to purchase from InterContinental later in 2006 for $30,000.

(3)Amounts exclude expenditures made from FF&E reserves funded from hotel operations, but includes amounts funded by us separately from hotel operations.

(4)The single $36,872 deposit secures InterContinental’s obligations under the Staybridge Suites^® portfolio, the InterContinental^® / Crowne Plaza^® / Holliday Inn^® / Staybridge Suites^® portfolio and the Crowne Plaza^® / Holiday Inn^® / Staybridge Suites^® portfolio.

(5)Renewal options may be exercised by the manager or tenant for all, but not less than all, of the hotels within each combination of hotels.

(6)Each management agreement or lease provides for payment to us of an annual minimum return or minimum rent, respectively. Management fees are generally subordinated to these minimum payment amounts and certain minimum payments are subject to full or limited guarantees.

(7)This agreement provides for annual additional return payment to us of $10,000 to the extent of available cash flow after payment of operating costs, funding of the FF&E reserve, payment of our minimum return and payment of certain management fees.

(8)This agreement provides for annual additional return payment to us of $3,458 to the extent of available cash flow after payment of operating costs, funding of the FF&E reserve, payment of our minimum return and payment of certain management fees.

(9)This agreement provides for annual additional return payment to us of $1,269 to the extent of available cash flow after payment of operating costs, funding of the FF&E reserve, payment of our minimum return and payment of certain management fees.

(10)These agreements provide for payment to us of 50% of available cash flow after payment of operating costs, funding the FF&E reserve, payment of our minimum return and reimbursement to the managers of working capital and guaranty advances, if any.

(11)Certain of our management agreements and leases provides for payment to us of a percentage of increases in total hotel sales over base year levels. Percentage returns under our management agreements are payable to us only to the extent of available cash flow, as defined in the agreements. The payment of percentage rent under our leases is not subject to available cash flow.

(12)We define coverage as total hotel sales minus all expenses which are not subordinated to minimum payments to us and the required FF&E reserve contributions (which data is provided to us by our operators or tenants), divided by the minimum return or minimum rent payments due to us. The return coverage amounts for certain of our management agreements have been revised for all periods presented to include only the minimum returns. The calculation in prior periods included additional return amounts for certain of our management agreements. For some combinations, amounts have been calculated using data for periods prior to our ownership of certain hotels and prior to commencement of operating agreements.

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The following tables summarize the operating statistics, including occupancy, ADR and RevPAR, reported to us by our hotel operators by management agreement or lease for the periods indicated for the 298 hotels we owned as of December 31, 2005:

	No. of	No. of
Management Agreement/Lease	Hotels	Rooms/Suites	2005(1)		2004(1)		Change
ADR
Host (no. 1)	53	7,610	$	108.15	$	100.38	7.7	%
Host (no. 2)	18	2,178	101.36		94.86		6.9	%
Marriott	35	5,382	101.33		94.72		7.0	%
Barcelo Crestline	19	2,756	102.64		92.26		11.3	%
InterContinental (no. 1)(2)	30	3,694	96.67		89.65		7.8	%
InterContinental (no. 2)	76	9,220	61.03		55.97		9.0	%
InterContinental (no. 3)(3)	13	3,946	117.38		110.92		5.8	%
Hyatt  (4)	24	2,929	75.45		69.07		9.2	%
Carlson(3)  (4)  (5)	12	2,262	81.64		80.62		1.3	%
Homestead	18	2,399	56.44		50.14		12.6	%
Total/Average	298	42,376	$	89.62	$	83.23	7.7	%
Occupancy
Host (no. 1)	53	7,610	70.9%		71.3%		-0.4	pt
Host (no. 2)	18	2,178	81.3%		79.3%		2.0	pt
Marriott	35	5,382	77.5%		76.3%		1.2	pt
Barcelo Crestline	19	2,756	72.8%		73.8%		-1.0	pt
InterContinental (no. 1)(2)	30	3,694	77.5%		75.3%		2.2	pt
InterContinental (no. 2)	76	9,220	75.0%		71.2%		3.8	pt
InterContinental (no. 3)(3)	13	3,946	74.5%		70.5%		4.0	pt
Hyatt(4)	24	2,929	67.2%		65.3%		1.9	pt
Carlson(3)  (4)  (5)	12	2,262	49.6%		57.8%		-8.2	pt
Homestead	18	2,399	77.3%		79.2%		-1.9	pt
Total/Average	298	42,376	73.1%		72.1%		1.0	pt
RevPAR
Host (no. 1)	53	7,610	$	76.68	$	71.57	7.1	%
Host (no. 2)	18	2,178	82.41		75.22		9.6	%
Marriott	35	5,382	78.53		72.27		8.7	%
Barcelo Crestline	19	2,756	74.72		68.09		9.7	%
InterContinental (no. 1)(2)	30	3,694	74.92		67.51		11.0	%
InterContinental (no. 2)	76	9,220	45.77		39.85		14.9	%
InterContinental (no. 3)(3)	13	3,946	87.45		78.20		11.8	%
Hyatt(4)	24	2,929	50.70		45.10		12.4	%
Carlson(3)  (4)  (5)	12	2,262	40.49		46.60		-13.1	%
Homestead	18	2,399	43.63		39.71		9.9	%
Total/Average	298	42,376	$	65.51	$	60.01	9.2	%

(1)Includes data for the calendar year indicated, except for our Marriott branded hotels, which include data for the 52 week fiscal periods ended December 30, 2005 and December 31, 2004, respectively.

(2)Data (other than No. of Hotels and No. of Rooms/Suites) excludes one hotel which has been closed temporarily due to fire damage sustained in May 2005.

(3)Includes data for periods prior to our ownership of certain hotels.

(4)Includes data for periods hotels were not operated by the current manager.

(5)We transferred operating responsibility for our Prime Hotels^SM to Carlson on April 4, 2005. During the second quarter of 2005, 11 of these 12 hotels were rebranded with Carlson brands and are currently undergoing renovations which have required some hotel rooms to be taken out of service. We sold the 12^th Prime Hotel^SM on September 30, 2005 and purchased an 84 room Country Inns & Suites by Carlson^® hotel on November 1, 2005, as a replacement hotel to be added to this combination.

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Seasonality

Our hotels have historically experienced seasonal differences typical of the U.S. hotel industry with higher revenues in the second and third quarters of calendar years compared with the first and fourth quarters. This seasonality is not expected to cause material fluctuations in our income or cash flow because our contractual management agreements and leases require our managers and tenants to make the substantial portion of our return payments and rents to us in equal amounts throughout a year. Seasonality may affect our hotel operating revenues, but we do not expect seasonal variations to have a material impact upon our financial results of operations or upon our managers’ or tenants’ ability to meet their contractual obligations to us.

Impact of Inflation

Inflation might have both positive and negative impacts upon us. Inflation might cause the value of our real estate investments to increase. In an inflationary environment, the percentage returns and rents which we receive based upon a percentage of gross hotel revenues should increase. Offsetting these benefits, inflation might cause our costs of equity and debt capital and other operating costs to increase. An increase in our capital costs or in our operating costs will result in decreased earnings unless it is offset by increased revenues. In periods of rapid inflation, our managers’ or tenants’ operating costs may increase faster than revenues and this fact may have an adverse impact upon us if the operating income from our properties becomes insufficient to pay our returns or rents. To mitigate the adverse impact of increased operating costs at our properties, all of our operating agreements contain security features, such as security deposits, and in certain instances, guarantees of our returns or rents. To mitigate the adverse impact of increased costs of debt capital in the event of material inflation, we may enter into interest rate hedge arrangements in the future. The decision to enter into these agreements will be based on the amount of our floating rate debt outstanding, our belief that material interest rate increases are likely to occur and upon requirements of our borrowing arrangements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk (dollar amounts in thousands)

We are exposed to risks associated with market changes in interest rates. We manage our exposure to this market risk by monitoring available financing alternatives. Our strategy to manage exposure to changes in interest rates is unchanged from December 31, 2004. Other than as described below, we do not foresee any significant changes in our exposure to fluctuations in interest rates or in how we manage this exposure in the near future.

As of December 31, 2005, our outstanding publicly traded debt consisted of five issues of fixed rate, senior unsecured notes:

			Annual	Annual
Principal Balance			Interest Rate	Interest Expense			Maturity	Interest Payments Due
	$	150,000	7.000%		$	10,500	2008	Semi-Annually
	50,000		9.125%		4,563		2010	Semi-Annually
	125,000		6.850%		8,563		2012	Semi-Annually
	300,000		6.750%		20,250		2013	Semi-Annually
	300,000		5.125%		15,375		2015	Semi-Annually
	$	925,000			$	59,251

No principal repayments are due under these notes until maturity. Because these notes bear interest at fixed rates, changes in market interest rates during the term of this debt will not affect our operating results. If at maturity these notes were refinanced at interest rates which are 10% higher than shown above, our per annum interest cost would increase by approximately $5,925. Changes in market interest rates also affect the fair value of our debt obligations; increases in market interest rates decrease the fair value of our fixed rate debt while decreases in market interest rates increase the fair value of our fixed rate debt. Based on the balances outstanding at December 31, 2005, and discounted cash flow analyses, a hypothetical immediate 10% change in interest rates would change the fair value of our fixed rate debt obligations by approximately $27,747.

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Each of our fixed rate unsecured debt arrangements allows us to make repayments earlier than the stated maturity date. We are generally allowed to make prepayments only at face value plus a premium equal to a make-whole amount, as defined, which is generally designed to preserve a stated yield to the note holder. These prepayment rights may afford us the opportunity to mitigate the risk of refinancing at maturity at higher rates by refinancing prior to maturity.

We have one mortgage payable secured by a hotel in Wichita, Kansas, with a fixed rate of 8.3% that matures on July 1, 2011. This note requires principal and interest payments through maturity pursuant to an amortization schedule and contains a provision that allows us to make repayment at a premium to face value.

Our revolving credit facility bears interest at floating rates and matures in June 2009. We can extend the maturity for one year for a fee. At December 31, 2005, we had $35,000 outstanding and $715,000 available for drawing under our revolving credit facility. Repayments under our revolving credit facility may be made at any time without penalty. We borrow in U.S. dollars and borrowings under our revolving bank credit facility are subject to interest at LIBOR plus a premium. Accordingly, we are vulnerable to changes in U.S. dollar based short term interest rates, specifically LIBOR. A change in interest rates would not affect the value of this floating rate debt but would affect our operating results. For example, the interest rate payable on our outstanding indebtedness of $35,000 at December 31, 2005, was 5.0% per annum. The following table presents the impact a 10% change in interest rates would have on floating rate interest expense as of December 31, 2005:

	Impact of Changes in Interest Rates
	Interest Rate Per Year	Outstanding Debt			Total Interest Expense Per Year
At December 31, 2005	5.0%		$	35,000		$	1,750
10% reduction	4.5%		$	35,000		$	1,575
10% increase	5.5%		$	35,000		$	1,925

The foregoing table shows the impact of an immediate change in floating interest rates. If interest rates were to change gradually over time, the impact would be spread over time. Our exposure to fluctuations in floating interest rates will increase or decrease in the future with increases or decreases in the outstanding amount under our revolving bank credit facility or other floating rate debt.

Item 8. Financial Statements and Supplementary Data

The information required by this item is included in Item 15 of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

We have no changes in or disagreements with our accountants regarding accounting and financial disclosure.

Item 9A. Controls and Procedures

As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our managing trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15. Based upon that evaluation, our managing trustees, President and Chief Operating Officer and Treasurer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Management Report on Assessment of Internal Control Over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system is designed to provide reasonable assurance to our management and board of trustees regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2005. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our assessment, we believe that, as of December 31, 2005, our internal control over financial reporting is effective.

Ernst & Young LLP, the independent registered public accounting firm that audited our 2005 consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on our assessment of our internal control over financial reporting. Its report appears elsewhere herein.

Item 9B. Other Information

None.

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PART III

Item 10. Directors and Executive Officers of the Registrant

We have adopted a code of business conduct and ethics that applies to all our representatives, including our officers and trustees and employees of RMR. Our code of business conduct and ethics is posted on our website, www.hptreit.com. A printed copy of our code of business conduct and ethics is also available free of charge to any shareholder who requests a copy. We intend to disclose any amendments or waivers to our code of business conduct and ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller (or any person performing similar functions) on our website.

The remainder of the information required by Item 10 is incorporated by reference to our definitive Proxy Statement, which will be filed not later than 120 days after the end of our fiscal year.

Item 11. Executive Compensation

The information required by Item 11 is incorporated by reference to our definitive Proxy Statement, which will be filed no later than 120 days after the end of our fiscal year.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters

Equity Compensation Plan Information. We may grant common shares to our officers and other employees of RMR under either our 1995 Incentive Share Award Plan or our 2003 Incentive Share Award Plan, collectively referred to as the Award Plans. In addition, our independent trustees receive 500 shares per year each as part of their annual compensation for serving as our trustees and such shares may be awarded under either of these plans. The terms of grants made under these plans are determined by our trustees at the time of the grant. The following table is as of December 31, 2005.

			Number of securities
			remaining available for
	Number of securities		future issuance under
	to be issued upon	Weighted-average	equity compensation
	exercise of	exercise price of	plans (excluding
	outstanding options,	outstanding options,	securities reflected in
Plan category	warrants and rights	warrants and rights	column (a)) (1)
	(a)	(b)	(c)
Equity compensation plans approved by security holders	None.	None.	2,862,979
Equity compensation plans not approved by security holders	None.	None.	2,862,979
Total	None.	None.	2,862,979

(1)The 1995 Incentive Share Award Plan was approved by our shareholder at the time; the 2003 Incentive Share Award Plan was approved by our Board of Trustees. Pursuant to the terms of the Award Plans, in no event shall the number of shares issued under both plans combined exceed 3,128,791; and 2,862,979 represents the combined total shares available under both plans on December 31, 2005.

Payments by us to RMR are described in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Related Party Transactions”. The remainder

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of the information required by Item 12 is incorporated by reference to our definitive Proxy Statement, which will be filed not later than 120 days after the end of our fiscal year.

Item 13. Certain Relationships and Related Transactions

The information required by Item 13 is incorporated by reference to our definitive Proxy Statement, which will be filed not later than 120 days after the end of our fiscal year.

Item 14. Principal Accountant Fees and Services

The information required by Item 14 is incorporated by reference to our definitive Proxy Statement, which will be filed not later than 120 days after the end of our fiscal year.

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PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) Index to Financial Statements and Financial Statement Schedules

The following audited consolidated financial statements and schedule of Hospitality Properties Trust are included on the pages indicated:

	Page
Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm	F-1
Consolidated Balance Sheet as of December 31, 2005 and 2004	F-3
Consolidated Statement of Income for each of the three years ended December 31, 2005	F-4
Consolidated Statement of Shareholders’ Equity for each of the three years ended December 31, 2005	F-5
Consolidated Statement of Cash Flows for each of the three years ended December 31, 2005	F-6
Notes to Consolidated Financial Statements	F-7
Schedule III - Real Estate and Accumulated Depreciation as of December 31, 2005	S-1

All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

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(b) Exhibits

3.1	Composite copy of Amended and Restated Declaration of Trust dated August 21, 1995, as amended to date. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998)
3.2	Articles Supplementary dated June 2, 1997. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997)
3.3	Articles Supplementary dated May 16, 2000. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000)
3.4	Articles Supplementary dated December 9, 2002. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002)
3.5	Composite copy of Amended and Restated Bylaws of the Company, as amended to date (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED MARCH 10, 2004)
4.1	Form of Common Share Certificate. (INCORPORATED BY REFERENCE TO THE COMPANY’S REGISTRATION STATEMENT ON FORM S-11 (FILE NO. 33-92330))
4.2	Form of temporary 8.875% Series B Cumulative Redeemable Preferred Share Certificate. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED DECEMBER 5, 2002)
4.3	Indenture, dated as of February 25, 1998, between the Company and State Street Bank and Trust Company. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997)
4.4	Supplemental Indenture No. 1, dated as of February 25, 1998, between the Company and State Street Bank and Trust Company, relating to the Company’s 7.00% Senior Notes due 2008, including form thereof. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997)
4.5	Supplemental Indenture No. 4 dated as of July 14, 2000, between the Company and State Street Bank and Trust Company, relating to the Company’s 9.125% Senior Notes due 2010, including form thereof. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000)
4.6	Supplemental Indenture No. 5, dated as of July 28, 2000, between the Company and State Street Bank and Trust Company, relating to the Company’s 9.125% Senior Notes due 2010, including form thereof. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000)
4.7	Supplemental Indenture No. 6 dated as of July 8, 2002 between the Company and State Street Bank and Trust Company, including form of 6.85% Senior Notes due 2012. (INCORPORATED BY REFERENCE TO THE COMPANY’S QUARTERLY REPORT ON FORM 10- Q FOR THE QUARTER ENDED JUNE 30, 2002)
4.8	Supplemental Indenture No. 7 dated as of January 24, 2003 between the Company and U.S. Bank National Association, as successor trustee, relating to the Company’s 6 3/4% Senior Notes due 2013, including form of thereof. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002)

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4.9	Supplemental Indenture No. 8 dated as of February 15, 2005 between the Company and U.S. Bank National Association, as successor trustee, relating to the Company’s 5 1/8% Senior Notes due 2015, including form of thereof. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED FEBRUARY 10, 2005)
4.10	Rights Agreement, dated as of May 20, 1997, between the Company and State Street Bank and Trust Company, as Rights Agent. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED MAY 29, 1997)
4.11	Appointment of Successor Rights Agent, dated as of December 13, 2004, by and between the Company and Wells Fargo Bank, National Association. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED DECEMBER 13, 2004)
8.1	Opinion of Sullivan & Worcester LLP as to certain tax matters. (FILED HEREWITH)
10.1	Amended and Restated Advisory Agreement, dated January 1, 2006, by and between Reit Management & Research LLC and the Company. (+) (FILED HEREWITH)
10.2	Master Management Agreement, dated as of January 6, 2006, by and among Reit Management & Research LLC and the Company. (+) (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED JANUARY 6, 2006)
10.3	Summary of Trustee Compensation. (+) (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2005)
10.4	The Company’s 1995 Incentive Share Award Plan (+). (INCORPORATED BY REFERENCE TO THE COMPANY’S REGISTRATION STATEMENT ON FORM S-11 (FILE NO. 33-92330))
10.5	Amendment to the Company’s 1995 Incentive Share Award Plan effective as of May 30, 2003 (+). (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003)
10.6	The Company’s 2003 Incentive Share Award Plan effective as of May 30, 2003. (+) (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003)
10.7	Form of Restricted Share Agreement. (+) (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2003)
10.8	Representative form of Indemnification Agreement. (+) (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2004)
10.9	Master Lease Agreement, dated as of April 30, 1999, by and among the Company, HPTCY Properties Trust and HMH HPT Courtyard LLC. (INCORPORATED BY REFERENCE TO THE COMPANY’S REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999)
10.10	Agreement to Assign, Release, Franchise and Manage, dated as of June 15, 2001, by and among HPT, HPTMI Properties Trust (“HPTMI”), HPTMI Hawaii, Inc. (“HPTMI Hawaii”), HPT TRS MI-135, Inc. (“TRS”), Marriott International, Inc. (“MI”), CR14 Tenant Corporation (“CR14”), CRTM17 Tenant Corporation (“CRTM17”), Courtyard Marriott Corporation (“Courtyard”), Marriott Hotel Services, Inc.

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	(“Full Service Manager”), Residence Inn by Marriott, Inc. (“Residence Inn”), SpringHill SMC Corporation (“SpringHill”) and TownePlace Management Corporation, (“TownePlace”). (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED JULY 31, 2001)
10.11	Form of Management Agreement by and between Courtyard and TRS. (INCORPORATED BY REFERENCE TO THE COMPANY’S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2001)
10.12	Pooling Agreement, dated as of June 15, 2001, by and among MI, Full Service Manager, Residence Inn, Courtyard, SpringHill, TownePlace and TRS. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED JULY 31, 2001)
10.13	Amended and Restated Limited Rent Guaranty, dated as of June 15, 2001, made by MI in favor of HPTMI. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED JULY 31, 2001)
10.14	Guaranty, dated as of June 15, 2001, made by MI in favor of TRS. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED JULY 31, 2001)
10.15	Holdback and Security Agreement, dated as of June 15, 2001, by and among MI, St. Louis Airport, L.L.C., Nashville Airport, L.L.C., Residence Inn, Courtyard, SpringHill, TownePlace, Full Service Manager, CR14, CRTM17, TRS, HPTMI Hawaii and HPTMI. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED JULY 31, 2001)
10.16	Amended and Restated Deposit Agreement, dated as of January 6, 2006, by and among HPT TRS IHG-1, HPT TRS IHG-2, Inc. (“HPT TRS IHG-2”), HPT TRS IHG-3, InterContinental Hotels Group Resources, Inc., IHG Management (Maryland) LLC and InterContinental Hotels Group (Canada), Inc. (FILED HEREWITH)
10.17	Management Agreement, dated as of July 1, 2003, by and between HPT TRS IHG-1, Inc. (“HPT TRS IHG-1”) and InterContinental Hotels Group Resources, Inc. (FILED HEREWITH)
10.18	First Amendment to Management Agreement, dated as of September 18, 2003, by and between HPT TRS IHG-1 and InterContinental Hotels Group Resources, Inc. (FILED HEREWITH)
10.19	Second Amendment to Management Agreement, dated as of March 2004, by and between HPT TRS IHG-1 and InterContinental Hotels Group Resources, Inc. (FILED HEREWITH)
10.20	Third Amendment to Management Agreement, dated as of February 16, 2005, by and between HPT TRS IHG-1 and InterContinental Hotels Group Resources, Inc. (FILED HEREWITH)
10.21	Fourth Amendment to Management Agreement, dated as of September 18, 2003, by and between HPT TRS IHG-1 and InterContinental Hotels Group Resources, Inc. (FILED HEREWITH)
10.22	Management Agreement, dated as of January 6, 2006, by and between HPT TRS IHG-1 and InterContinental Hotels Group Resources, Inc. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED OCTOBER 27, 2003)
10.23	First Amendment to Management Agreement, dated as of February 16, 2005, by and between HPT TRS IHG-1 and InterContinental. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004)
10.24	Amended and Restated Management Agreement, dated as of January 6, 2006, by and among HPT TRS IHG-2, IHG Management (Maryland) LLC and Intercontinental Hotels Group (Canada), Inc. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED JANUARY 6, 2006)

59

10.25	Lease Agreement, dated as of February 16, 2005, by and among HPT IHG PR, Inc. and InterContinental Hotels (Puerto Rico) Inc. (INCORPORATED BY REFERENCE TO THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2004)
10.26	Second Amended and Restated Consolidated Guaranty Agreement, dated as of January 20, 2006, made by Intercontinental Hotels Group plc for the benefit of HPT TRS IHG-1, HPT TRS IHG-2, HPT TRS IHG-3, Inc., HPT IHG PR, Inc. and the Company. (FILED HEREWITH)
10.27	Amended and Restated Credit Agreement, dated as of May 23, 2005, by and among the Company, Wachovia Bank, National Association, as Agent and the additional agents, arrangers and financial institutions signatory thereto. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED MAY 23, 2005)
10.28	Registration Agreement, dated as of October 10, 2003, by and between the Company and HRPT Properties Trust. (INCORPORATED BY REFERENCE TO THE COMPANY’S REGISTRATION STATEMENT ON FORM S-3 FILED AS OF OCTOBER 14, 2003 (FILE NO. 333-109658))
10.29	Assumption, Termination and Amendment Agreement among InterContinental Hotels Limited, InterContinental Hotels Group plc, HPT TRS IHG-1, HPT TRS IHG-2, HPT IHG PR, Inc. and the Company dated July 1, 2005. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2005)
10.30	Amended and Restated Purchase and Sale Agreement, dated as of February 9, 2005, by and among BHR Texas, L.P., InterContinental Hotels Group Resources, Inc. (“InterContinental”), Crowne Plaza LAX, LLC, Holiday Pacific Partners Limited Partnership, 220 Bloor Street Hotel, Inc. and Staybridge Markham, Inc., as sellers, and HPT IHG-2 Properties Trust (“HPT IHG-2”), as buyer. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED FEBRUARY 10, 2005)
10.31	Amended and Restated Stock Purchase Agreement, dated as of February 9, 2005, by and between Six Continents International Holdings, B.V., as seller, and HPT IHG-2, as buyer. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED FEBRUARY 10, 2005)
10.32	Amended and Restated Purchase and Sale Agreement, dated as of February 9, 2005, by and between BHR Texas, L.P., InterContinental and Crowne Plaza LAX. (INCORPORATED BY REFERENCE TO THE COMPANY’S CURRENT REPORT ON FORM 8-K DATED FEBRUARY 10, 2005)
12.1	Computation of Ratio of Earnings to Fixed Charges. (FILED HEREWITH)
12.2	Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Distributions. (FILED HEREWITH)
21.1	Subsidiaries of the Registrant. (FILED HEREWITH)
23.1	Consent of Ernst & Young LLP. (FILED HEREWITH)
23.2	Consent of Sullivan & Worcester LLP. (INCLUDED IN EXHIBIT 8.1 TO THIS ANNUAL REPORT ON FORM 10-K)
31.1	Rule 13a-14(a) Certification. (FILED HEREWITH)
31.2	Rule 13a-14(a) Certification. (FILED HEREWITH)
31.3	Rule 13a-14(a) Certification. (FILED HEREWITH)
31.4	Rule 13a-14(a) Certification. (FILED HEREWITH)

60

32.1 Section 1350 Certification. (FURNISHED HEREWITH)

(+)Management contract or compensatory plan or agreement.

61

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Trustees and Shareholders of Hospitality Properties Trust:

We have audited the accompanying consolidated balance sheets of Hospitality Properties Trust as of December 31, 2005 and 2004, and the related consolidated statements of income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hospitality Properties Trust at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Hospitality Properties Trust’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 3, 2006 expressed an unqualified opinion thereon.

	/s/ Ernst & Young LLP
Boston, Massachusetts
March 3, 2006

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Trustees and Shareholders of Hospitality Properties Trust:

We have audited management’s assessment, included in Item 9A of Hospitality Properties Trust’s Annual Report on Form 10-K under the heading Management Report on Assessment of Internal Control Over Financial Reporting, that Hospitality Properties Trust maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Hospitality Properties Trust’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that Hospitality Properties Trust maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Hospitality Properties Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based onthe COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the 2005 consolidated financial statementsof Hospitality Properties Trust and our report dated March 3, 2006 expressed an unqualified opinion thereon.

	/s/ Ernst & Young LLP
Boston, Massachusetts
March 3, 2006

F-2

HOSPITALITY PROPERTIES TRUST

CONSOLIDATED BALANCE SHEET

(dollars in thousands, except share data)

	As of December 31,
	2005			2004
Assets
Real estate properties, at cost:
Land	$	537,389		$	460,748
Buildings, improvements and equipment	3,089,304			2,720,242
	3,626,693			3,180,990
Accumulated depreciation	(613,007		)	(556,517		)
	3,013,686			2,624,473
Cash and cash equivalents	18,568			15,894
Restricted cash (FF&E escrow)	29,063			38,511
Other assets, net	53,290			10,547
	$	3,114,607		$	2,689,425
Liabilities and Shareholders’ Equity
Revolving credit facility	$	35,000		$	72,000
Senior notes, net of discounts	921,606			621,679
Mortgage payable	3,766			3,826
Security deposits	185,304			175,304
Dividends payable	1,914			50,300
Accounts payable and other	108,595			77,782
Due to affiliate	2,967			2,661
Total liabilities	1,259,152			1,003,552
Commitments and contingencies
Shareholders’ equity:
Preferred shares of beneficial interest, no par value, 100,000,000 shares authorized:
Series B preferred shares; 8 7/8% cumulative redeemable; 3,450,000 shares issued and outstanding, aggregate liquidation preference $86,250	83,306			83,306
Common shares of beneficial interest; $0.01 par value; 100,000,000 shares authorized, 71,920,578 and 67,203,228 shares issued and outstanding, respectively	719			672
Additional paid-in capital	2,059,883			1,859,936
Cumulative net income	1,211,072			1,081,169
Cumulative preferred distributions	(59,336		)	(51,680		)
Cumulative common distributions	(1,440,189		)	(1,287,530		)
Total shareholders’ equity	1,855,455			1,685,873
	$	3,114,607		$	2,689,425

The accompanying notes are an integral part of these financial statements.

F-3

HOSPITALITY PROPERTIES TRUST

CONSOLIDATED STATEMENT OF INCOME

(in thousands, except per share data)

	Year Ended December 31,
	2005		2004		2003
Revenues:
Hotel operating revenues	$	682,541	$	498,122	$	209,299
Rental income:
Minimum rent	126,829		125,669		216,125
Percentage rent	3,902		2,803		1,128
	130,731		128,472		217,253
FF&E reserve income	19,767		18,147		18,000
Interest income	1,373		627		733
Gain on lease terminations	—		—		107,516
Total revenues	834,412		645,368		552,801
Expenses:
Hotel operating expenses	476,858		333,818		145,863
Interest (including amortization of deferred financing costs of $2,894, $2,744 and $2,536, respectively)	65,263		50,393		44,536
Depreciation and amortization	131,792		114,883		104,807
General and administrative	23,296		19,386		16,800
Loss on early extinguishment of debt	—		—		2,582
Loss on asset impairment	7,300		—		—
Total expenses	704,509		518,480		314,588
Income before gain on sale of real estate	129,903		126,888		238,213
Gain on sale of real estate	—		203		—
Net income	129,903		127,091		238,213
Preferred distributions	7,656		9,674		14,780
Excess of liquidation preference over carrying value of preferred shares	—		2,793		—
Net income available for common shareholders	$	122,247	$	114,624	$	223,433
Weighted average common shares outstanding	69,866		66,503		62,576
Basic and diluted earnings per common share:
Net income available for common shareholders	$	1.75	$	1.72	$	3.57

The accompanying notes are an integral part of these financial statements.

F-4

HOSPITALITY PROPERTIES TRUST

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

(in thousands, except share data)

	Preferred Shares											Common Shares
	Series A					Series B			Cumulative						Cumulative			Additional
	Number of Shares		Preferred Shares			Number of Shares	Preferred Shares		Preferred Distributions			Number of Shares	Common Shares		Common Distributions			Paid-in Capital			Cumulative Net Income		Total
Balance at December 31, 2002	3,000,000		$	72,207		3,450,000	$	83,306	$	(26,481	)	62,547,348	$	625	$	(868,732	)	$	1,668,230		$	715,865	$	1,645,020
Common share grants	—		—			—	—		—			39,730	1		—			1,181			—		1,182
Net income	—		—			—	—		—			—	—		—			—			238,213		238,213
Distributions	—		—			—	—		(13,611		)	—	—		(225,276		)	—			—		(238,887		)
Balance at December 31, 2003	3,000,000		72,207			3,450,000	83,306		(40,092		)	62,587,078	626		(1,094,008		)	1,669,411			954,078		1,645,528
Issuance of shares, net	—		—			—	—		—			4,600,000	46		—			192,638			—		192,684
Common share grants	—		—			—	—		—			16,150	—		—			680			—		680
Redemption of preferred shares	(3,000,000	)	(72,207		)	—	—		—			—	—		—			(2,793		)	—		(75,000		)
Net income	—		—			—	—		—			—	—		—			—			127,091		127,091
Distributions	—		—			—	—		(11,588		)	—	—		(193,522		)	—			—		(205,110		)
Balance at December 31, 2004	—		—			3,450,000	83,306		(51,680		)	67,203,228	672		(1,287,530		)	1,859,936			1,081,169		1,685,873
Issuance of shares, net	—		—			—	—		—			4,700,000	47		—			199,186			—		199,233
Common share grants	—		—			—	—		—			17,350	—		—			761			—		761
Net income	—		—			—	—		—			—	—		—			—			129,903		129,903
Distributions	—		—			—	—		(7,656		)	—	—		(152,659		)	—			—		(160,315		)
Balance at December 31, 2005	—		$	—		3,450,000	$	83,306	$	(59,336	)	71,920,578	$	719	$	(1,440,189	)	$	2,059,883		$	1,211,072	$	1,855,455

The accompanying notes are an integral part of these financial statements.

F-5

HOSPITALITY PROPERTIES TRUST

CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)

	Year Ended December 31,
	2005			2004			2003
Cash Flows From Operating Activities:
Net income	$	129,903		$	127,091		$	238,213
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	131,792			114,883			104,807
Non-cash portion of gain on lease terminations	—			—			(104,951		)
Amortization of deferred financing costs as interest	2,894			2,744			2,536
Non-cash income	(2,952		)	(2,952		)	(6,719		)
FF&E reserve income and deposits	(32,338		)	(29,522		)	(25,248		)
Loss on early extinguishment of debt	—			—			2,582
Gain on sale of real estate	—			(203		)	—
Loss on asset impairment	7,300			—			—
Changes in assets and liabilities:
(Increase) decrease in other assets	(1,091		)	2,262			(1,339		)
Increase in accounts payable and other	6,492			7,490			9,485
Increase in due to affiliate	306			1,325			39
Cash provided by operating activities	242,306			223,118			219,405
Cash Flows From Investing Activities:
Real estate acquisitions	(443,104		)	—			(354,577		)
FF&E reserve fundings	(45,390		)	(10,211		)	(33,905		)
Real estate acquisition deposit	(10,000		)	—			—
Increase in security deposits	10,000			—			16,872
Proceeds from sale of real estate	3,227			7,750			—
Cash used in investing activities	(485,267		)	(2,461		)	(371,610		)
Cash Flows From Financing Activities:
Proceeds from issuance of common shares, net	199,233			192,684			—
Debt issuance, net of discount	299,442			—			296,997
Repayment of senior notes	—			—			(150,000		)
Redemption of preferred shares	—			(75,000		)	—
Draws on revolving credit facility	319,000			293,000			391,000
Repayments of revolving credit facility	(356,000		)	(422,000		)	(190,000		)
Deferred finance costs paid	(7,339		)	(2		)	(2,877		)
Distributions to preferred shareholders	(7,656		)	(11,588		)	(13,611		)
Distributions to common shareholders	(201,045		)	(188,285		)	(180,213		)
Cash provided by (used in) financing activities	245,635			(211,191		)	151,296
Increase (decrease) in cash and cash equivalents	2,674			9,466			(909		)
Cash and cash equivalents at beginning of year	15,894			6,428			7,337
Cash and cash equivalents at end of year	$	18,568		$	15,894		$	6,428
Supplemental Information:
Cash paid for interest	$	56,597		$	47,612		$	34,929
Non-cash operating activities:
Net assets transferred in lease default	—			4,920			151,445
Non-cash investing activities:
Property managers deposits in FF&E reserve	31,056			27,296			22,679
Purchases of fixed assets with FF&E reserve	(76,860		)	(46,529		)	(53,337		)
Non-cash financing activities:
Issuance of common shares	761			680			1,181

The accompanying notes are an integral part of these financial statements.

F-6

HOSPITALITY PROPERTIES TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except share data)

1. Organization

Hospitality Properties Trust, or HPT, we or us, is a real estate investment trust, or REIT, organized on February 7, 1995, under the laws of the State of Maryland, which invests in hotels. At December 31, 2005, HPT, directly and through subsidiaries, owned 298 properties.

The properties of HPT and its subsidiaries are operated by companies unaffiliated with HPT: Host Marriott Corporation, or Host; Marriott International, Inc., or Marriott; InterContinental Hotels Group, plc, or InterContinental; Barcelo Crestline Corporation, or Barcelo Crestline; Global Hyatt Corporation, or Hyatt; Carlson Hotels Worldwide, or Carlson; and BRE/Homestead Village LLC, or Homestead. Hereinafter these hotel operators are sometimes referred to as managers and/or tenants.

2. Summary of Significant Accounting Policies

Consolidation. These consolidated financial statements include the accounts of HPT and its subsidiaries, all of which are 100% owned directly or indirectly by HPT. We have determined that each of our taxable REIT subsidiaries, or TRSs, is a variable interest entity that must be consolidated because we are the primary beneficiary. All intercompany transactions and balances have been eliminated.

Real Estate Properties. Real estate properties are recorded at cost. We allocate the cost of real estate acquired among building, land, furniture, fixtures and equipment, and, if applicable, the value of in-place leases, the fair market value of above or below market leases and customer relationships. Depreciation on real estate properties is recognized on a straight line basis over estimated useful lives of up to 40 years for buildings and improvements and up to 12 years for personal property. The value of intangible assets is amortized over the term of the associated lease.

We regularly evaluate whether events or changes in circumstances have occurred that could indicate an impairment in the value of long-lived assets. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows of the related properties to determine if an impairment loss should be recognized. The amount of impairment loss is determined by comparing the historical carrying value of the asset to its estimated fair value. Estimated fair value is determined through an evaluation of recent financial performance and projected discounted cash flows of properties using standard industry valuation techniques. In addition to consideration of impairment upon the events or changes in circumstances described above, we regularly evaluate the remaining lives of its long-lived assets. If estimated lives are changed, the carrying values of affected assets are allocated over the revised remaining lives.

Cash and Cash Equivalents. Highly liquid investments with original maturities of three months or less at date of purchase are considered to be cash equivalents. The carrying amount of cash and cash equivalents is equal to its fair value.

Restricted Cash. Restricted cash consists of amounts escrowed to fund periodic renovations and improvements at our hotels.

Deferred Financing Costs. Costs incurred to borrow are capitalized and amortized as interest expense over the term of the related borrowing. Deferred financing costs were $9,110 and $4,180 at December 31, 2005 and 2004, respectively, net of accumulated amortization of $3,301 and $6,699, respectively, and are included in other assets, net in the accompanying consolidated balance sheet.

Revenue Recognition. We report hotel operating revenues for managed hotels in our consolidated statement of income. Hotel operating revenues, consisting primarily of room sales and sales of food, beverage and

F-7

communication services are generally recognized when services are performed. Our share of the operating results of our managed hotels in excess of the minimum returns due us are generally determined annually. Hotel operating income in excess of the minimum returns due to us under our management agreements is recognized when all contingencies are met and the income is earned.

We recognize rental income from operating leases on a straight line basis over the life of the lease agreements. Percentage rent is recognized when all contingencies are met and the rent is earned.

We own all the FF&E reserve escrows for hotels leased to our TRSs and for most of the hotels leased to third parties. One third party lease provides that the FF&E reserve escrow is owned by the tenant and we have a security and remainder interest in that escrow account. When we own the escrow account, payments by our third party tenants into the escrow are reported by us as FF&E reserve income. When we have a security and remainder interest in the escrow account, tenant deposits are not included in revenue.

Per Common Share Amounts. Per common share amounts are computed using the weighted average number of common shares outstanding during the period. We have no common share equivalents, instruments convertible into common shares or other dilutive instruments.

Reclassifications. Reclassifications have been made to the prior year’s financial statements to conform to the current year’s presentation.

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates.

Segment Information. We have only one operating segment, hotel investments.

Income Taxes. We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. As a REIT, we are generally not subject to federal income taxes on our net income provided we distribute our taxable income to our shareholders and meet certain organization and operating requirements. Even as a REIT, we are subject to taxes in non-U.S. jurisdictions in which we own hotels and in certain state and local jurisdictions. Further, we lease our managed hotels to our wholly owned TRSs that, unlike most of our other subsidiaries, are taxable entities that together file one consolidated tax return.

We account for income taxes under the provisions of Statement of Financial Accounting Standards, or SFAS, No. 109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts that are expected to be realized. SFAS 109 generally permits deferred tax assets and liabilities to be offset and presented as a single amount except in cases where they are attributable to different tax paying components such as a REIT and its TRS.

At December 31, 2005 we had a deferred tax liability of $9,333 related to the hotel we purchased in Puerto Rico in February 2005. Specifically, we acquired all of the outstanding stock of a C corporation that owned the hotel as its primary asset, which generally would cause us to succeed to the acquired corporation’s tax bases. However, for U.S tax purposes we made an election under Section 338(g) of the Internal Revenue Code to avoid being treated as the successor to the acquired corporation’s federal income tax attributes, including its adjusted tax bases. We made no such election for Puerto Rico tax purposes. Under SFAS 109 we are required to establish deferred tax assets and liabilities for the tax effects of differences between assigned values in the purchase price allocation and the tax bases of assets and liabilities assumed in a purchase business combination. Because a REIT (or its

F-8

subsidiary) is subject to tax in Puerto Rico, we recorded in purchase accounting a deferred tax liability for these bases differences at our Puerto Rico effective tax rate.

At December 31, 2005 and 2004 our consolidated TRS had a net deferred tax asset, prior to any valuation allowance, of $2,314 and $2,806, respectively, which consists primarily of net operating loss carryforwards and reserves for bad debts. Because of the uncertainty surrounding our ability to realize the future benefit of these assets we have provided a 100% valuation allowance as of December 31, 2005 and 2004. Accordingly, no provision or benefit for income taxes with respect to our consolidated TRS is reflected in the accompanying consolidated statement of income. As of December 31, 2005 our consolidated TRS had net operating loss carryforwards for federal income tax purposes of approximately $3,823 which will expire beginning in 2024, if they remain unused.

3. Shareholders’ Equity

We reserved an aggregate of 3,128,791 shares of our common shares to be issued under the terms of the 1995 Incentive Share Award Plan and the 2003 Incentive Share Award Plan, collectively referred to as the Award Plans. During the year ended December 31, 2005, we awarded 15,850 common shares to our officers and certain employees of our manager pursuant to these plans. In addition, our independent trustees are each awarded 500 common shares annually as part of their annual fees. The shares awarded to the trustees vest immediately. The shares awarded to our officers and certain employees of our manager vest in three annual installments beginning on the date of grant. Share awards are expensed over their vesting period. At December 31, 2005, 2,862,979 of our common shares remain reserved for issuance under the Award Plans.

On June 5, 2005, we sold 4,500,000 of our common shares at a price of $44.39 per share in a public offering. On June 24, 2005, we sold an additional 200,000 common shares at a price of $44.39 pursuant to an over allotment option granted to the underwriters. Net proceeds from these sales, after underwriting and other offering expenses, were $199,233. We used these proceeds to reduce borrowings outstanding under our revolving credit facility.

On April 12, 2004, we redeemed all of our outstanding 9 ½% Series A preferred shares at their liquidation preference of $25 per share plus accrued and unpaid distributions of $0.0792 per share. The excess of the liquidation preference of the redeemed shares over their carrying amount of $2,793 was charged to additional paid in capital and deducted from net income to determine net income available to common shareholders in the calculation of earnings per share.

Each of our 3,450,000 Series B cumulative redeemable preferred shares has a distribution rate of $2.21875 per annum, payable in equal quarterly amounts, and a liquidation preference of $25 ($86,250 in aggregate). Series B preferred shares are redeemable at our option for $25 each plus accrued and unpaid distributions at any time on or after December 10, 2007.

Cash distributions paid or payable by us to our common shareholders for the years ended December 31, 2005, 2004 and 2003, were $2.90 per share, $2.88 per share and $2.88 per share, respectively. The characterization for income tax reporting purposes of the distributions paid to our common shareholders in 2005, 2004 and 2003 was 96.9%, 100.0% and 100.0% ordinary income, respectively, and 3.1%, 0.0% and 0.0% return of capital, respectively.

4. Management Agreements and Leases

As of December 31, 2005, each of our 298 hotels is included in one of ten combinations of hotels and either leased to our TRSs and managed by an independent hotel operating company or leased to a third party. We do not operate hotels. At December 31, 2005, we had 189 managed hotels and 109 leased hotels. Our agreements have initial terms expiring between 2010 and 2030. Each of these agreements is for a combination or pool of between 12

F-9

and 76 of our hotels. The agreements contain renewal options for all, but not less than all, of the affected properties, and the renewal terms total 20 to 40 years. Each agreement generally requires the third party manager or tenant to: (i) make payments to us of minimum returns or minimum rents; (ii) deposit a percentage of total hotel sales into reserves established for the regular refurbishment of our hotels, or FF&E reserves; and (iii) make payments to us of percentage returns or rent of 5% to 10% of increases in gross hotel revenues over threshold amounts and/or, in certain circumstances, make payments to our TRSs of additional returns based on increases in hotel operating income. Some of the third party managers or tenants have provided deposits or guarantees to secure their obligation to pay us.

As of December 31, 2005, our management agreements and leases provide for minimum return payments or minimum rents to be paid to us during the remaining initial terms as follows:

	Total Minimum Return Payments Under Management Agreements with Third Parties		Total Minimum Lease Payments from Third Parties
2006	$	192,684	$	125,256
2007	193,534		125,256
2008	193,959		125,256
2009	193,959		125,256
2010	193,959		125,256
Thereafter	2,965,822		450,739
	$	3,933,917	$	1,077,019

As of December 31, 2005, the average remaining initial terms of our leases and management agreements, weighted based on minimum returns or rents from third parties, was approximately 15.9 years, and the weighted average remaining total term, including renewal options which may be exercised, was 46.1 years.

We settled all our outstanding claims with Prime Hospitality Corp., or Prime, a former manager, arising from its July 2003 lease default by entering a management agreement for our 24 AmeriSuites^® hotels effective on January 1, 2004. The balance of the retained deposits and the value of other property received from Prime pursuant to this settlement, totaling approximately $44,281, is being amortized into our income on a straight line basis over the initial 15 year term of the management contract for the affected hotels. The unamortized balance of $38,377 at December 31, 2005, is included in accounts payable and other liabilities in the accompanying consolidated balance sheet. In October 2004, Prime was sold to the Blackstone Group, or Blackstone. In January 2005, Blackstone sold the AmeriSuites^® brand and transferred operating responsibility for these hotels to Hyatt.

During 2003, we entered into agreements related to the termination of three leases. We recorded gains of $107,516 in connection with these agreements.

5. Real Estate Properties

Our real estate properties, at cost, consisted of land of $537,389, buildings and improvements of $2,717,965 and furniture, fixtures and equipment of $371,339, as of December 31, 2005; and land of $460,748, buildings and improvements of $2,356,860 and furniture, fixtures and equipment of $363,382, as of December 31, 2004. As of December 31, 2005, we owned 298 hotel properties.

During 2005, 2004 and 2003, we invested $45,390, $10,211 and $33,905 respectively, in our owned hotels in excess of amounts funded from FF&E reserves. As a result of these additional investments, manager and tenant

F-10

obligations to us for annual minimum return payments or minimum rents increased $2,384, $841 and $3,391 in 2005, 2004 and 2003, respectively.

On December 17, 2004, we agreed to purchase 13 hotels from InterContinental for $450,000. The hotels include four full service InterContinental^® hotels, four full service Crowne Plaza^® hotels, three full service Holiday Inn^® hotels and two extended stay Staybridge Suites^® hotels. These hotels have a total of 3,946 rooms/suites and approximately 164,000 square feet of meeting space. The hotels are located in six states in the United States; one InterContinental^® hotel and one Staybridge Suites^® hotel are located in Ontario, Canada; and one InterContinental^® hotel is located in San Juan, Puerto Rico. The $450,000 purchase price includes $25,000 which we have agreed to pay during the three years following the closing in connection with certain improvements to the hotels. On February 16, 2005, we completed the acquisition of 12 of the 13 hotels; on May 31, 2005, we completed the purchase of the final hotel.

In connection with our decision in June 2005 to sell our Prime Hotel^SM located in Atlanta, Georgia we recorded $7,300 loss on asset impairment to reduce the carrying value of the hotel to its estimated net realizable value less cost to sell. We sold the hotel in September 2005.

On November 1, 2005, we acquired a Country Inns & Suites by Carlson^® hotel located in Brooklyn Center, Minnesota with 84 guestrooms from Carlson for $4,100.

At December 31, 2005, 13 of our hotels were on land leased from unrelated third parties. The remaining term of each ground lease (including renewal options) is in excess of 29 years. Ground rent payable under nine of these ground leases is generally calculated as a percentage of hotel revenues. Eleven of the 13 ground leases require minimum annual rent ranging from approximately $102 to $556 per year; and minimum rents under two ground leases have been pre-paid. Under the terms of our leases and management agreements, payments of ground lease obligations are made by our managers or tenants. However, if a manager or tenant did not perform obligations under a ground lease or elected not to renew any ground lease, we might have to perform obligations under the ground lease or renew the ground lease in order to protect our investment in the affected hotel. Future minimum annual rent payments due under the ground leases are $1,994 for 2006 through 2008, $1,784 for 2009 and 2010 and total $73,709 for all years thereafter.

6. Indebtedness

At December 31, 2005 and 2004, our indebtedness was as follows:

	As of December 31,
	2005			2004
Senior Notes, due 2008 at 7%	$	150,000		$	150,000
Senior Notes, due 2010 at 9.125%	50,000			50,000
Senior Notes, due 2012 at 6.85%	125,000			125,000
Senior Notes, due 2013 at 6.75%	300,000			300,000
Senior Notes, due 2015 at 5.125%	300,000			—
Unamortized discounts	(3,394		)	(3,321		)
Total unsecured senior notes	921,606			621,679
Unsecured revolving credit facility	35,000			72,000
Mortgage Note, due 2011 at 8.3%	3,766			3,826
	$	960,372		$	697,505

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All of our senior notes are prepayable at any time prior to their maturity date at par plus accrued interest plus a premium equal to a make whole amount, as defined, generally designed to preserve a stated yield to the noteholder. Interest on all of our senior notes is payable semi-annually in arrears.

On May 23, 2005, we amended and restated our revolving credit facility with a group of commercial banks. Our credit facility matures in June 2009 and may be extended at our option to June 2010 upon our payment of an extension fee. Borrowings under the credit facility can be up to $750,000 and the credit facility includes a feature under which the maximum amount available for borrowing may be increased to $1,500,000, in certain circumstances. Borrowings under our credit facility are unsecured. Funds may be drawn, repaid and redrawn until maturity, and no principal repayment is due until maturity. Interest on borrowings under the credit facility is payable at a spread above LIBOR. As of December 31, 2005, the $35,000 outstanding on our credit facility accrued interest at 5.03% and $715,000 was available to be drawn. During 2005, 2004 and 2003, the weighted average interest rate on the amounts outstanding under our revolving credit facility was 4.2%, 2.8% and 2.5%, respectively.

Our revolving credit agreement and note indenture and its supplements contain financial covenants which, among other things, restrict our ability to incur indebtedness and require us to maintain financial ratios and a minimum net worth. We were in compliance with these covenants during the periods presented.

As of December 31, 2005 and 2004, the estimated aggregate market values of our indebtedness were as follows:

	As of December 31,
	2005		2004
Revolving credit facility at 5.03%	$	35,000	$	72,000
Senior Notes, due 2008 at 7%	157,635		165,287
Senior Notes, due 2010 at 9.125%	59,126		62,676
Mortgage Note, due 2011 at 8.3%	4,470		4,504
Senior Notes, due 2012 at 6.85%	137,521		143,207
Senior Notes, due 2013 at 6.75%	327,832		340,760
Senior Notes, due 2015 at 5.125%	295,539		—
	$	1,017,123	$	788,434

7. Transactions with Affiliates

Reit Management & Research LLC, or RMR, originates and presents investment opportunities to our board and provides administrative services to us. Our contract with RMR for such services continues from year to year and is subject to the annual approval by a board committee comprised of our independent trustees. RMR is compensated at an annual rate equal to 0.7% of our average real estate investments, as defined, up to the first $250,000 of such investments and 0.5% thereafter plus an incentive fee based upon increases in cash available for distribution per share, as defined. Management fees, excluding incentive fees, earned for the years ended 2005, 2004 and 2003 were $17,730, $15,812 and $14,540, respectively. Incentive fees are paid in restricted common shares based on a formula. Incentive fees for 2005, 2004 and 2003 were $1,397, $0 and $0, respectively. We expect to issue 33,973 restricted common shares in satisfaction of the 2005 incentive fees in 2006. As of December 31, 2005, RMR and its affiliates owned 459,834 of our common shares. RMR is beneficially owned by Barry M. Portnoy, who also serves as one of our managing trustees, and his son, Adam D. Portnoy, who is a Vice President of RMR.

8. Concentration

At December 31, 2005, our 298 hotels contained 42,376 rooms and were located in 38 states in the United States, Ontario, Canada and Puerto Rico. Between 5% and 14% of our hotels, by investment, were located in each of

F-12

California, Texas, Virginia, Georgia and Florida. Our two hotels in Ontario, Canada and our hotel in Puerto Rico represent 1% and 4% of our hotels, by investment, respectively.

All of our third party managers or tenants are subsidiaries of other companies. The percentage of our minimum return payments and minimum rents, for each combination of hotels is shown below, as of December 31, 2005.

Manager / Tenant is a	Number of	Minimum Return /		% of
Subsidiary of:	Properties	Minimum Rent		Total
Host (no. 1)	53	$	55,951	18%
InterContinental (no. 2)	76	50,000		16%
Marriott	35	47,986		15%
InterContinental (no. 1)	30	36,097		11%
InterContinental (no. 3)	13	34,713		11%
Barcelo Crestline	19	28,508		9%
Host (no. 2)	18	18,705		6%
Hyatt	24	18,000		6%
Homestead	18	15,960		5%
Carlson	12	9,045		3%
Total	298	$	314,965	100%

Minimum return and minimum rent payments due to us under some of our management agreements and leases are supported by guarantees. The guarantee provided by Hyatt with respect to the 24 hotels managed by Hyatt is limited to $50,000 ($50,000 remaining at December 31, 2005). The guarantee provided by Carlson with respect to the 12 hotels managed by Carlson is limited to $40,000 ($37,790 remaining at December 31, 2005). The combined guarantee provided by InterContinental for the 119 hotels managed or leased by InterContinental is limited to $125,000 ($115,922 remaining at December 31, 2005) and will expire if and when the hotels achieve stipulated operating results. The guarantee provided by Homestead expires if and when the hotels achieve stipulated operating results.

Each of our hotels is included in a combined management agreement or lease as described above. Operations at some of our managed hotels generated net financial results that were $2,491, $10,470 and $6,922 less than the guaranteed minimum returns due us in 2005, 2004 and 2003, respectively. These amounts have been paid by the hotel managers or their guarantors and are reflected as a reduction of hotel operating expenses in our consolidated statement of income.

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9. Selected Quarterly Financial Data (Unaudited)

	2005
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenues	$	180,747	$	218,081	$	221,687	$	213,897
Net income available for common shareholders	26,792		20,497		28,671		46,287
Net income available for common shareholders per share (1)	.40		.30		.40		.64
Distributions per common share (2)	.72		.72		.73		.73

	2004
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter
Revenues	$	153,311	$	163,231	$	171,992	$	156,834
Net income available for common shareholders	23,054		28,835		28,793		33,942
Net income available for common shareholders per share  (1)	. 36		. 43		. 43		.51
Distributions per common share (2)	.72		.72		.72		.72

(1)   The sum of per common share amounts for the four quarters differs from annual per share amounts due to the required method of computing weighted average number of shares in interim periods and rounding.

(2)   Amounts represent distributions declared with respect to the periods shown. Distributions are generally paid in the quarterly period following the quarterly period to which they relate.

10. Subsequent Events

On January 6, 2006, we purchased the Harbor Court Complex in the Inner Harbor area of Baltimore, Maryland for $78,000. The Harbor Court Complex is a mixed use development comprised of the five star, five diamond Harbor Court Hotel, a 72,042 square foot office building and a 530 space seven story parking garage. The hotel has 195 guest rooms, including 22 suites, 8,000 square feet of meeting space and a roof top fitness center that includes a tennis court, squash court, indoor pool, aerobics center and spa therapy rooms. Simultaneously with this purchase, we entered into an agreement with InterContinental to manage the Harbor Court Hotel under its InterContinental Hotels & Resorts^® brand. This hotel has been added to the combination agreement for 13 hotels managed by InterContinental. Our minimum return from this expanded combination of hotels will increase by $4,800 in 2006, $5,200 in 2007 and $5,300 per year thereafter. We have agreed to invest up to $2,300 over the next two years in connection with the rebranding of the Harbor Court Hotel as the InterContinental^® Harbor Court Baltimore. In addition to the returns generated by the hotel component of the complex, we will receive the net cash flow from the office and parking parts of the property; and we have entered into a management agreement with RMR to operate the office building and an agreement with an unaffiliated third party to manage the parking garage.

On January 25, 2006, we agreed to purchase nine hotels for $196,200 and to invest $25,100 in these hotels during the three years following closing to fund capital improvements. These hotels include five full service Crowne Plaza^® hotels, one full service Holiday Inn Select^® hotel, two Staybridge Suites^® hotels and one Holiday Inn SunSpree Resort^® hotel; they have a total of 2,712 rooms/suites and approximately 68,000 square feet of meeting space. These hotels are located in three states in the United States and the Holiday Inn SunSpree Resort^® hotel is located in Montego Bay, Jamaica. On January 25, 2006, we completed the acquisition of eight of the nine hotels with an effective date of January 20, 2006. The purchase of the 524 room Holiday Inn SunSpree Resort^® hotel for approximately $30 million was delayed pending Jamaican tax and regulatory approvals, and is expected to close later in 2006. Circumstances may delay this purchase for an extended period or prevent its occurring. Simultaneous

F-14

with our purchase of these eight hotels, we entered a long term combination management agreement with subsidiaries of InterContinental; simultaneous with our purchase of the Holiday Inn SunSpree Resort^® we expect to enter a long term lease with a subsidiary of InterContinental. The annual combined amount payable to us for all nine hotels as a minimum return under the management contract and minimum rent under the lease will be $15,800 in 2006, $17,800 in 2007, $18,700 in 2008 and approximately $19,000 thereafter. In addition, we are entitled to receive additional return payments, a percentage of gross revenue over a threshold at these hotels starting in 2008 and the hotel cash flow remaining after the payment of base and incentive management fees. The minimum return under the management agreement and the minimum rent under the lease are calculated and payable in U.S. dollars. Other amounts due with respect to the hotel in Jamaica may be calculated in Jamaican dollars but will be payable in U.S. dollars. The management agreement and the lease each extend through 2030, and InterContinental has two all or none renewal options for 15 years each. The obligations to pay the minimum return under the management agreement and the minimum rent under the lease are supported by a limited guaranty from InterContinental until these hotels achieve stipulated levels of operating income. Further, the obligation to pay the minimum return under the management agreement will also be supported by a limited guaranty from the InterContinental subsidiary tenant for the hotel in Jamaica. The agreements also require a reserve for capital expenditures starting in 2008.

F-15

HOSPITALITY PROPERTIES TRUST

SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2005
(dollars in millions)

							Costs
							Capitalized
	Initial						Subsequent to		Gross Amount at which
	Cost to Company						Acquisition		Carried at Close of Period
					Buildings &						Buildings &
	Encumbrances		Land		Improvements		Improvements		Land		Improvements		Total(1)
71 Courtyards	$	—	$	127	$	589	$	54	$	127	$	643	$	770
76 Candlewood Hotels	4		86		455		2		86		457		543
32 Staybridge Suites	—		85		318		12		85		330		415
37 Residence Inns	—		69		322		12		69		334		403
24 AmeriSuites	—		25		193		2		25		195		220
4 InterContinental	—		24		196		—		24		196		220
18 Homestead Village	—		28		106		1		28		107		135
4 Crowne Plaza	—		37		89		—		37		89		126
3 Marriott Full Service	—		14		82		8		14		90		104
12 TownePlace Suites	—		17		78		—		17		78		95
4 Radisson	—		7		74		7		7		81		88
5 Country Inns & Suites	—		6		51		7		6		58		64
3 Holiday Inn	—		7		24		—		7		24		31
3 Park Plaza	—		2		20		2		2		22		24
2 SpringHill Suites	—		3		15		—		3		15		18
Total (298 hotels)	$	4	$	537	$	2,612	$	107	$	537	$	2,719	$	3,256

						Life on which
						Depreciation in
						Latest Income
	Accumulated			Date of	Date	Statement is
	Depreciation(1)			Construction	Acquired	Computed
71 Courtyards	$	(139	)	1987 through 2000	1995 through 2003	15 - 40 Years
76 Candlewood Hotels	(62		)	1996 through 2000	1997 through 2003	15 - 40 Years
32 Staybridge Suites	(48		)	1989 through 2002	1998 through 2005	15 - 40 Years
37 Residence Inns	(71		)	1989 through 2001	1996 through 2001	15 - 40 Years
24 AmeriSuites	(35		)	1992 through 2000	1997 through 2002	15 - 40 Years
4 InterContinental	(5		)	1924 through 1989	2005	15 - 40 Years
18 Homestead Village	(21		)	1996 through 1998	1999	15 - 40 Years
4 Crowne Plaza	(2		)	1981 through 1986	2005	15 - 40 Years
3 Marriott Full Service	(15		)	1972 through 1995	1998 through 2001	15 - 40 Years
12 TownePlace Suites	(13		)	1997 through 2000	1998 through 2001	15 - 40 Years
4 Radisson	(17		)	1987 through 1990	1996 through 1997	15 - 40 Years
5 Country Inns & Suites	(12		)	1987 through 1997	1996 and 2005	15 - 40 Years
3 Holiday Inn	(1		)	1986 through 2001	2005	15 - 40 Years
3 Park Plaza	(5		)	1987 through 1990	1996	15 - 40 Years
2 SpringHill Suites	(2		)	1997 through 2000	2000 through 2001	15 - 40 Years
Total (298 hotels)	$	(448	)

(1)Excludes $371 of personal property classified on our consolidated balance sheet as furniture, fixtures and equipment and $165 of related accumulated depreciation.

S-1

HOSPITALITY PROPERTIES TRUST

NOTES TO SCHEDULE III
DECEMBER 31, 2005
(dollars in thousands)

(A) The change in accumulated depreciation for the period from January 1, 2003 to December 31, 2005, is as follows:

	2005			2004			2003
Balance at beginning of year	$	379,594		$	319,204		$	262,231
Additions: depreciation expense	72,339			61,623			56,973
Dispositions	(3,541		)	(1,233		)	—
Balance at close of year	$	448,392		$	379,594		$	319,204

(B) The change in total cost of properties for the period from January 1, 2003 to December 31, 2005, is as follows:

	2005			2004			2003
Balance at beginning of year	$	2,817,608		$	2,813,737		$	2,462,876
Additions: hotel acquisitions and capital expenditures	451,126			12,332			350,861
Dispositions	(13,381		)	(8,461		)	—
Balance at close of year	$	3,255,353		$	2,817,608		$	2,813,737

(C) The net tax basis for federal income tax purposes of our real estate properties was $2,793,791 on December 31, 2005.

S-2

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Hospitality Properties Trust
	By:	/s/ John G. Murray
		John G. Murray
		President and Chief Operating Officer
Dated:March 13, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ John G. Murray	President and	March 13, 2006
John G. Murray	Chief Operating Officer
/s/ Mark L. Kleifges	Treasurer and Chief	March 13, 2006
Mark L. Kleifges	Financial Officer
	(principal financial officer
	and principal accounting officer)
/s/ Frank J. Bailey	Trustee	March 13, 2006
Frank J. Bailey
/s/ John L. Harrington	Trustee	March 13, 2006
John L. Harrington
/s/ Arthur G. Koumantzelis	Trustee	March 13, 2006
Arthur G. Koumantzelis
/s/ Gerard M. Martin	Trustee	March 13, 2006
Gerard M. Martin
/s/ Barry M. Portnoy	Trustee	March 13, 2006
Barry M. Portnoy

EX-8.1

Exhibit 8.1

[LETTERHEAD OF SULLIVAN & WORCESTER LLP]

March 13, 2006

Hospitality Properties Trust
400 Centre Street
Newton, Massachusetts  02458

Ladies and Gentlemen:

The following opinion is furnished to Hospitality Properties Trust, a Maryland real estate investment trust (the “Company”), to be filed with the Securities and Exchange Commission (the “SEC”) as Exhibit 8.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 (the “Form 10-K”), under the Securities Exchange Act of 1934, as amended.

We have acted as counsel for the Company in connection with the preparation of the Form 10-K, and we have reviewed originals or copies, certified or otherwise identified to our satisfaction, of such corporate records, certificates and statements of officers and accountants of the Company and of public officials, and such other documents as we have considered relevant and necessary in order to furnish the opinion hereinafter set forth. In doing so, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as copies, and the authenticity of the originals of such documents. Specifically, and without limiting the generality of the foregoing, we have reviewed:  (i) the declaration of trust and the by-laws of the Company, each as amended and restated;  and (ii) the sections of Item 1 of the Form 10-K captioned “Federal Income Tax Considerations” and “ERISA Plans, Keogh Plans and Individual Retirement Accounts”. With respect to all questions of fact on which the opinion set forth below is based, we have assumed the accuracy and completeness of and have relied on the information set forth in the Form 10-K and in the documents incorporated therein by reference, and on representations and certifications made to us by officers of the Company. We have not independently verified such information.

The opinion set forth below is based upon the Internal Revenue Code of 1986, as amended, the Treasury Regulations issued thereunder, published administrative interpretations thereof, and judicial decisions with respect thereto, all as of the date hereof (collectively, “Tax Laws”), and upon the Employee Retirement Income Security Act of 1974, as amended, the Department of Labor regulations issued thereunder, published administrative interpretations thereof, and judicial decisions with respect thereto, all as of the date hereof (collectively, “ERISA Laws”). No assurance can be given that Tax Laws or ERISA Laws will not change. In preparing the discussions with respect to Tax Laws matters and ERISA Laws matters in the sections of Item 1 of the Form 10-K captioned “Federal Income Tax Considerations” and “ERISA Plans,

Keogh Plans and Individual Retirement Accounts”, we have made certain assumptions and expressed certain conditions and qualifications therein, all of which assumptions, conditions and qualifications are incorporated herein by reference. With respect to all questions of fact on which our opinion is based, we have assumed the initial and continuing truth, accuracy and completeness of:  (i) the information set forth in the Form 10-K and in the documents incorporated therein by reference; and (ii) representations made to us by officers of the Company or contained in the Form 10-K, in each such instance without regard to qualifications such as “to the best knowledge of” or “in the belief of”.

We have relied upon, but not independently verified, the foregoing assumptions. If any of the foregoing assumptions are inaccurate or incomplete for any reason, or if the transactions described in the Form 10-K, or the documents incorporated therein by reference, have been consummated in a manner that is inconsistent with the manner contemplated therein, our opinion as expressed below may be adversely affected and may not be relied upon.

Based upon and subject to the foregoing, we are of the opinion that the discussions with respect to Tax Laws matters and ERISA Laws matters in the sections of Item 1 of the Form 10-K captioned “Federal Income Tax Considerations” and “ERISA Plans, Keogh Plans and Individual Retirement Accounts” in all material respects are accurate and fairly summarize the Tax Laws issues and the ERISA Laws issues addressed therein, and hereby confirm that the opinions of counsel referred to in said sections represent our opinions on the subject matter thereof.

Our opinion above is limited to the matters specifically covered hereby, and we have not been asked to address, nor have we addressed, any other matters or any other transactions. Further, we disclaim any undertaking to advise you of any subsequent changes of the matters stated, represented or assumed herein or any subsequent changes in Tax Laws or ERISA Laws.

This opinion is intended solely for the benefit and use of the Company, and is not to be used, released, quoted, or relied upon by anyone else for any purpose (other than as required by law) without our prior written consent. We hereby consent to the filing of a copy of this opinion as an exhibit to the Form 10-K, which is incorporated by reference in the Company’s Registration Statements on Forms S-3 (File Nos. 333-43573, 333-89307, 333-84064 and 333-109658) under the Securities Act of 1933, as amended (the “Act”), and to the references to our firm in the Form 10-K and such Registration Statements. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Act or under the rules and regulations of the SEC promulgated thereunder.

Very truly yours,

/s/ Sullivan & Worcester LLP

SULLIVAN & WORCESTER LLP

2

EX-10.1

Exhibit 10.1

AMENDED AND RESTATED

ADVISORY AGREEMENT

THIS AMENDED AND RESTATED ADVISORY AGREEMENT (this “Agreement”) is entered into as of January 1, 2006, by and between Hospitality Properties Trust, a Maryland real estate investment trust (the “Company”), Reit Management & Research LLC, a Delaware limited liability company, successor in interest to HRPT Advisors, Inc. (the “Advisor”), and, solely with respect to Section 15 of this Agreement with respect to certain non-competition covenants, Barry M. Portnoy, Gerard M. Martin and Adam D. Portnoy.

WHEREAS, the Company and the Advisor are parties to an Advisory Agreement, dated as of January 1, 1998 (as amended, the “Original Agreement”), and Barry M. Portnoy and Gerard M. Martin are parties to the Original Agreement solely with respect to certain covenants in Section 15 thereof;

WHEREAS, the Company, through its Independent Trustees (as hereinafter defined), has requested that the Original Agreement be amended to add Adam D. Portnoy as a party thereto solely with respect to Section 15 of the Original Agreement with respect to certain non-competition covenants, and the Company and Adam D. Portnoy have agreed to that amendment; and

WHEREAS, in connection with that amendment, the parties hereto desire to restate the Original Agreement, as so amended;

NOW, THEREFORE, in consideration of the mutual agreements herein set forth, the parties hereto agree that the Original Agreement is hereby amended and restated to read in its entirety as follows:

1.General Duties of the Advisor. The Advisor shall use its best efforts to present to the Company a continuing and suitable investment program consistent with the investment policies and objectives of the Company. Subject to the supervision of the Company’s Board of Trustees (the “Trustees”) and upon their direction, and consistent with the provisions of the Company’s declaration of trust (as amended and restated from time to time, the “Declaration”) , the Advisor shall:

(a)serve as the Company’s investment advisor, with its obligations to include providing research and economic and statistical data in connection with the Company’s investments and recommending changes in the Company’s investment policies, when appropriate;

(b)investigate and evaluate investment opportunities and make recommendations concerning such opportunities to the Trustees;

(c)manage the Company’s short term investments including the acquisition and sale of money market instruments in accordance with the Company’s policies;

(d)administer the day to day operations of the Company;

(e)investigate, select and conduct relations and enter into appropriate contracts on behalf of the Company with other individuals, corporations and entities in furtherance of the investment activities of the Company;

(f)upon request of the Trustees, act as attorney in fact or agent in acquiring and disposing of investments and funds of the Company and in handling, prosecuting and settling any claims of the Company;

(g)upon request of the Trustees, invest and reinvest any money of the Company;

(h)obtain for the Company, when appropriate, the services of property managers or management firms to perform customary property management services with regard to the real estate properties owned by or in the possession of the Company, and perform such supervisory or monitoring services on behalf of the Company with respect to the activities of such property managers or management firms as would be performed by a prudent owner, including but not limited to closely supervising the activities of such property managers or management firms, visiting the properties, participating in property management budgeting, reviewing the accounting of property income and expenses, reporting on the financial status of the properties and reviewing the accounting of property income and expenses, reporting on the financial status of the properties and reviewing and approving marketing plans, but excluding the actual on-site property management functions performed by said property managers or management firms;

(i)obtain for the Company such services as may be required for other activities relating to the investment portfolio of the Company;

(j)administer such day-to-day bookkeeping and accounting functions as are required for the proper management of the assets of the Company, contract for audits and prepare or cause to be prepared such reports as may be required by any governmental authority in connection with the ordinary conduct of the Company’s business, including without limitation, periodic reports, returns or statements required under the Securities Exchange Act of 1934, as amended, the Internal Revenue Code of 1986, as amended (as in effect from time to time, the “Internal Revenue Code”), the securities and tax securities of any jurisdiction in which the Company is obligated to file such reports, or the rules and regulations promulgated under any of the foregoing;

(k)provide office space, office equipment and the use of accounting or computing equipment when required, and provide personnel necessary for the performance of the foregoing services; and

(l)from time to time, or at any time requested by the Trustees, make reports thereto of its performance of the foregoing services to the Company.

In performing its services under this Agreement, the Advisor may utilize facilities, personnel and support services of various of its Affiliates (as defined below). The Advisor shall be responsible for paying such Affiliates for their personnel and support services and facilities out of its own funds. Notwithstanding the above, the Company may request, and will pay for the direct costs of, services provided by Affiliates of the Advisor provided that such request is approved by a majority vote of the Directors who are not Affiliates of the Advisor and who do not perform any services for the Company except as Trustee (the “Independent Trustees”).

As used in this Agreement, the term “Affiliate” means, as to any Person, (i) any other Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any other Person that owns beneficially, directly or indirectly, five percent (5%) or more of the outstanding capital

stock, shares or equity interests of such Person, or (iii) any officer, director, employee, general partner or trustee of such Person or of any Person controlling, controlled by or under common control with such Person (excluding Trustees who are not otherwise Affiliates of such Person). The term “Person” means and includes individuals, corporations, limited partnerships, general partnerships, joint stock companies or associations, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, limited liability companies, and other entities.

In performing its services hereunder with respect to the Company, the Advisor shall adhere to, and shall require its officers and employees in the course of providing such services to the Company to adhere to, the Company’s Code of Business Conduct and Ethics, as in effect from time to time. In addition, the Advisor shall make available to its officers and employees providing such services to the Company the procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters relating to the Company and for the confidential, anonymous submission by such officers and employees of concerns regarding questionable accounting or auditing matters relating to the Company, as set forth in the Company’s Procedures Regarding Concerns or Complaints about Accounting, Internal Accounting Controls or Auditing Matters, as in effect from time to time.

2.Bank Accounts. The Advisor shall establish and maintain one or more bank accounts in its own name or, at the direction of the Trustees, in the name of the Company, and shall collect and deposit into such account or accounts and disburse therefrom any monies on behalf of the Company, provided that no funds in any such account shall be commingled with any funds of the Advisor or any other Person. The Advisor shall from time to time render an appropriate accounting of such collections and payments to the Trustees and to the auditors of the Company.

3.Records. The Advisor shall maintain appropriate books of account and records relating to services performed pursuant to this Agreement, which books of account and records shall be available for inspection by representatives of the Company upon reasonable notice during ordinary business hours.

4.Information Furnished Advisor. The Trustees shall at all times keep the Advisor fully informed with regard to the investment policies of the Company, the capitalization policy of the Company, and generally the Trustees’ then-current intentions as to the future of the Company. In particular, the Trustees shall notify the Advisor promptly of their intention to sell or otherwise dispose of any of the Company’s investments or to make any new investment. The Company shall furnish the Advisor with a certified copy of all financial statements, a signed copy of each report prepared by independent certified public accountants, and such other information with regard to its affairs as the Advisor may from time to time reasonably request. The Company shall retain legal counsel and accountants to provide such legal and accounting advice and services as the Advisor or the Trustees shall deem necessary or appropriate to adequately perform the functions of the Company.

5.REIT Qualification. Anything else in this Agreement to the contrary notwithstanding, the Advisor shall refrain from any action (including, without limitation, the furnishing or rendering of services to tenants of property or managing real property) which, in its judgment made in good faith, or in the judgment of the Trustees as transmitted to the Advisor in writing, would (a) adversely affect the status of the Company as a real estate investment trust as defined and limited in the Internal Revenue Code or the regulations and rulings thereunder or which would make the

Company subject to the Investment Company Act of 1940, as amended, or (b) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company or over its securities, or (c) otherwise not be permitted by the Declaration or Bylaws of the Company, except if such action shall be ordered by the Trustees, in which event the Advisor shall promptly notify the Trustees of the Advisor’s judgment that such action would adversely affect such status or violate any such law, rule or regulation or the Declaration or Bylaws of the Company and shall refrain from taking such action pending further clarification or instructions from the Trustees. In addition, the Advisor shall take such affirmative steps which, in its judgment made in good faith, or in the judgment of the Trustees as transmitted to the Advisor in writing, would prevent or cure any action described in (a), (b) or (c) above.

6.Self-Dealing. Neither the Advisor nor any Affiliate of the Advisor shall sell any property or assets to the Company or purchase any property or assets from the Company, directly or indirectly, except as approved by a majority of the Independent Trustees. In addition, except as otherwise provided in Sections 1, 9, or 10 hereof, or except as approved by a majority of the Independent Trustees, neither the Advisor nor any Affiliate of the Advisor shall receive any commission or other remuneration, directly or indirectly, in connection with the activities of the Company or any joint venture or partnership in which the Company is a party. Except for compensation received by the Advisor pursuant to Section 9 hereof, all commissions or other remuneration received by the Advisor or an Affiliate of the Advisor and not approved by the Independent Trustees under Sections 1 or 10 hereof or this Section 6 shall be reported to the Company annually within ninety (90) days following the end of the Company’s fiscal year.

Upon request of any Trustee, the Advisor shall from time to time promptly furnish the Company with information on a confidential basis as to any investments within the Company’s investment policies made by the Advisor for its own account.

7.No Partnership or Joint Venture. The Company and the Advisor are not partners or joint venturers with each other and neither the terms of this Agreement nor the fact that the Company and the Advisor have joint interests in any one or more investments shall be construed so as to make them such partners or joint venturers or impose any liability as such on either of them.

8.Fidelity Bond. The Advisor shall not be required to obtain or maintain a fidelity bond in connection with the performance of its services hereunder.

9.Compensation. The Advisor shall be paid, for the services rendered by it to the Company pursuant to this Agreement, an annual advisory fee (the “Advisory Fee”) equal to 0.70 percent of the Average Invested Capital (as defined below) computed as of the last day of the Company’s fiscal year up to $250,000,000, and 0.50 percent of the Average Invested Capital equal to or exceeding $250,000,000. In addition, the Advisor shall be paid an annual incentive fee (the “Incentive Fee”), consisting of a number of shares of the Company’s Common Shares of Beneficial Interest (“Common Shares”) with a value (determined as provided below) equal to 15 percent of the amount by which Cash Available for Distribution to Shareholders (as defined below) for such fiscal year exceeds Cash Available for Distribution to Shareholders for the fiscal year immediately prior to such fiscal year, but in no event shall the Incentive Fee payable in respect of any year exceed $.02 multiplied by the weighted average number of Common Shares outstanding during such year.

Payment of the Incentive Fee shall be made by issuance of Common Shares, under the Company’s 1995 Incentive Share Award Plan or otherwise. The number of Common Shares to be issued in payment of the Incentive Fee shall be the whole number of shares (disregarding any fraction) equal to the value of the Incentive Fee, as provided above, divided by the average closing price of the Common Shares on the New York Stock Exchange during the month of December in the year for which the computation is made. (The Advisory Fee and Incentive Fee are hereinafter collectively referred to as the “Fees.”)

For purposes of this Agreement:  “Average Invested Capital” of the Company shall mean the daily weighted average of the total historical cost of the assets of the Company invested, directly or indirectly, in equity interests in and loans secured by real estate and personal property owned in connection with such real estate (collectively, “Properties”) (including capitalized closing costs and costs which may be allocated to intangibles or are unallocated), before reserves for depreciation or bad debts or other similar noncash reserves, computed by taking the weighted average of such values. “Cash Available for Distribution” shall mean, for any period, the net income of the Company, before real estate depreciation, amortization and other non-cash or non-recurring items, less the amount, if any, included in the calculation thereof which represents rental income recognized by the Company in respect of amounts which, pursuant to leasing arrangements relating to any of the Properties, the Company is required to escrow or reserve for renovations and refurbishments. Calculation of Average Invested Capital shall be made annually by the Company; calculation of Cash Available for Distribution to Shareholders shall be made annually by the Company’s independent certified public accountants.

The Advisory Fee shall be computed and payable within thirty (30) days following the end of each fiscal month by the Company, and the Incentive Fee shall be computed and payable within thirty (30) days following the public availability of the Company’s annual audited financial statements for each fiscal year. Such computations shall be based upon the Company’s monthly or annual financial statements, as the case may be, and shall be in reasonable detail. A copy of such computations shall promptly be delivered to the Advisor accompanied by payment of the Fees shown thereon to be due and payable.

The payment of the aggregate annual Fees payable for any fiscal year shall be subject to adjustment as of the end of each fiscal year. On or before the 30th day after public availability of the Company’s annual audited financial statements for each fiscal year, the Company shall deliver to the Advisor an Officer’s Certificate (a “Certificate”) reasonably acceptable to the Advisor and certified by an authorized officer of the Company setting forth (i) the Average Invested Capital and Funds From Operations for the Company’s fiscal year ended upon the immediately preceding December 31, and (ii) the Company’s computation of the Fees payable for said fiscal year.

If the aggregate annual Fees payable for said fiscal year as shown in such Certificate exceed the aggregate amounts previously paid with respect thereto by the Company, the Company shall include its check for such deficit and deliver the same to the Advisor with such Certificate.

If the aggregate annual Fees payable for said fiscal year as shown in such Certificate are less than the aggregate amounts previously paid with respect thereto by the Company, the Company shall specify in such Certificate whether the Advisor should (i) remit to the Company its check in an amount equal to such difference or (ii) grant the Company a credit against the Fees next coming due in the amount of such difference until such amount has been fully paid or otherwise discharged.

10.Additional Services.

(a)The Advisor shall provide to the Company an internal audit function meeting applicable requirements of the New York Stock Exchange and the Securities and Exchange Commission and otherwise in scope approved by the Company’s Audit Committee commencing as of October 1, 2003. As additional compensation payable pursuant to Section 10 to the Advisor for such additional services, the Company agrees to reimburse the Advisor, within 30 days of the receipt of the invoice therefor, for a pro rata share (as agreed to by the Independent Trustees from time to time) of the following costs of the Advisor:

(i)employment expenses of the Advisor’s internal audit manager and other employees of the Advisor actively engaged in providing internal audit services, including but not limited to salary, wages, payroll taxes and the cost of employee benefit plans; and

(ii)the reasonable travel and other out-of-pocket expenses of the Advisor relating to the activities of the Advisor’s internal audit manager and other of the Advisor’s employees actively engaged in providing internal audit services and the reasonable third party expenses which the Advisor incurs in connection with its provision of internal audit services.

(b)If, and to the extent that, the Company shall request the Advisor to render services on behalf of the Company other than those required to be rendered by the Advisor in accordance with the terms of this Agreement, such additional services shall be compensated separately on terms to be agreed upon between the Advisor and the Company from time to time.

11.Expenses of the Advisor. Without regard to the compensation received by the Advisor from the Company pursuant to this Agreement, the Advisor shall bear the following expenses incurred in connection with the performance of its duties under this Agreement:

(a)employment expenses of the personnel employed by the Advisor, including but not limited to, salaries, wages, payroll taxes and the cost of employee benefit plans;

(b)fees and travel and other expenses paid to directors, officers and employees of the Advisor, except fees and travel and other expenses of such persons who are Trustees or officers of the Company incurred in their capacities as Trustees or officers of the Company;

(c)rent, telephone, utilities, office furniture, equipment and machinery and other office expenses of the Advisor, except to the extent such expenses relate solely to an office maintained by the Company separate from the office of the Advisor; and

(d)miscellaneous administrative expenses incurred in supervising, monitoring and inspecting real property and other investments of the Company or relating to performance by the Advisor of its obligations hereunder.

12.Expenses of the Company. Except as expressly otherwise provided in this Agreement, the Company shall pay all its expenses not payable by the Advisor, and, without limiting the generality of the foregoing, it is specifically agreed that the following expenses of the Company shall be paid by the Company and shall not be paid by the Advisor:

(a)the cost of borrowed money;

(b)taxes on income and taxes and assessments on real property, if any, and all other taxes applicable to the Company;

(c)legal, auditing, accounting, underwriting, brokerage, listing, reporting, registration and other fees, and printing, engraving and other expenses and taxes incurred in connection with the issuance, distribution, transfer, trading, registration and stock exchange listing of the Company’s securities, including transfer agent’s, registrar’s and indenture trustee’s fees and charges;

(d)expenses of organizing, restructuring, reorganizing or terminating the Company, or of revising, amending, converting or modifying the Company’s organizational documents;

(e)fees and travel and other expenses paid to Trustees and officers of the Company in their capacities as such (but not in their capacities as officers or employees of the Advisor) and fees and travel and other expenses paid to advisors, contractors, mortgage services, consultants, and other agents and independent contractors employed by or on behalf of the Company;

(f)Expenses directly connected with the acquisition, disposition or ownership of real estate interests or other property (including the costs of foreclosure, insurance premiums, legal services, brokerage and sales commissions, maintenance, repair, improvement and local management or property), other than expenses with respect thereto of employees of the Advisor, to the extent that such expenses are to be borne by the Advisor pursuant to Section 11 above;

(g)all insurance costs incurred in connection with the Company (including officer and trustee liability insurance) or in connection with any officer and trustee indemnity agreement to which the Company is a party;

(h)expenses connected with payments of dividends or interest or contributions in cash or any other form made or caused to be made by the Trustees to holders of securities of the Company;

(i)all expenses connected with communications to holders of securities of the Company and other bookkeeping and clerical work necessary to maintaining relations with holders of securities, including the cost of printing and mailing certificates for securities and proxy solicitation materials and reports to holders of the Company’s securities;

(j)legal, accounting and auditing fees and expenses, other than those described in subsection (c) above; and

(k)expenses relating to any office or office facilities maintained by the Company separate from the office of the Advisor.

13.Annual Operating Expenses Limitation Requiring Refunds by the Advisor. There shall be a limitation (the “Limitation”) on Operating Expenses (as defined below) of the Company for each fiscal year which shall be the lower of the following:

(a)the greater of (i) 2% of the Average Invested Capital of the Company for such fiscal year; and (ii) 25% of the Net Income (as defined below) of the Company for such fiscal year; or

(b)the lowest of any applicable operating expense limitations that may be imposed by law or regulation in a state in which any securities of the Company are or will be qualified for sale or by a national securities exchange on which any securities of the Company are or may be listed, as such limitations may be altered from time to time.

For purposes of this Agreement, “Operating Expenses” shall be calculated on the basis of the Company’s annual audited financial statements and shall be deemed to mean the aggregate annual expenses regarded as ordinary operating expenses in accordance with generally accepted accounting principles (including the Fees), exclusive of the following:

(i)the expenses set forth in subsections (a) through (d), inclusive, and (f) of Section 12 hereof;

(ii)non-cash expenditures, including provisions for depreciation, depletion, bad debt reserve and amortization;

(iii)losses on the disposition of assets and provisions for such losses;

(iv)options granted to the Advisor; and

(v)other extraordinary charges including, without limitation, litigation costs.

For purposes of this Agreement, “Net Income” for any period shall be calculated on the basis of the Company’s audited financial statements and shall be deemed to mean total revenues applicable to such period, less the expenses applicable to such period, including additions to reserves for depreciation or bad debts or other similar noncash reserves, determined in accordance with generally accepted accounting principles.

On or before the 30th day after public availability of the Company’s annual audited financial statements for each fiscal year, the Advisor shall refund (to the extent of the aggregate Fees it has received with respect to such year) to the Company the amount, if any, by which the Operating Expenses exceeded the Limitation; provided however, that unless such action is prohibited by laws or regulations, the Company may instead permit such refund to be effected by a reduction in the amount of the Fees to be paid by the Company during the fiscal years following the fiscal year with respect to which such refund is to be made until such time as any such refund is fully paid and provided the Limitation imposed by this Section 13 shall require that only so much of such excess need be refunded as is conclusively determined by the Trustees, including a majority of the Independent Trustees, to be unjustified.

14.Limits of Advisor Responsibility. The Advisor assumes no responsibility other than to render the services described herein in good faith and shall not be responsible for any action of the Trustees in following or declining to follow any advice or recommendation of the Advisor. The Advisor, its shareholders, directors, officers, employees and Affiliates will not be liable to the Company, its shareholders, or others, except by reason of acts constituting bad faith, willful or wanton misconduct or gross negligence. The Company shall reimburse, indemnify and hold harmless the Advisor, its shareholders, directors, officers and employees and its Affiliates for and from any and all expenses, losses, damages, liabilities, demands, charges and claims of any nature whatsoever in respect of or arising from any acts or omissions of the Advisor undertaken in good faith and in accordance with the standard set forth above pursuant to the authority granted to it by this Agreement.

15.Other Activities of Advisor. None of the Advisor, Barry M. Portnoy, Gerard M. Martin nor Adam D. Portnoy shall, without the consent of the Company’s Independent Trustees, (i) provide advisory services to, or serve as a director or officer of, any other REIT which is principally engaged in the business of ownership of hotel properties or (ii) make direct investments in hotel facilities. Nothing herein shall prevent the Advisor from engaging in other activities or businesses or from acting as advisor to any other Person (including other real estate investment trusts) provided that no such activity shall conflict with the Advisor’s obligations under the immediately preceding sentence; provided, further, however, that the Advisor shall notify the Company in writing in the event that it does so act as an advisor to another real estate investment trust. The Advisor shall be free from any obligation to present to the Company any particular investment opportunity which comes to the Advisor. Without limiting the foregoing provisions, the Advisor agrees, upon the request of any Trustee of the Company, to disclose certain investment information concerning the Advisor or certain of its Affiliates, provided, however, that such disclosure shall be required only if it does not constitute a breach of any fiduciary duty or obligation of the Advisor.

Directors, officers, employees and agents of the Advisor or of its Affiliates may serve as Trustees, officers, employees, agents, nominees or signatories of the Company. When executing documents other otherwise acting in such capacities for the Company, such persons shall use their respective titles in the Company. Such persons shall receive no compensation from the Company for their services to the Company in any such capacities.

16.Term, Termination. This Agreement shall continue in force and effect until December 31, 2006 unless extended or sooner terminated in accordance with the terms of this Section 16. The expiration date of the then current term of this Agreement is referred to herein as the “Termination Date.”  The Company shall give written notice to the Advisor prior to the Termination Date of its intention to renew this Agreement and the period of such extension. Such renewal shall be determined by a majority of the Independent Trustees of the Company.

Notwithstanding any other provision of this Agreement to the contrary, this Agreement, or any extension hereof, may be terminated by either party hereto upon sixty (60) days’ written notice to the other party, pursuant to a majority vote of the Independent Trustees; or, in the case of a termination by the Advisor, by a majority vote of the directors of the Advisor.

Paragraph 19 hereof shall govern the rights, liabilities and obligations of the parties upon termination of this Agreement; and, except as provided in paragraph 20, such termination shall be without further liability of either party to the other than for breach or violation of this Agreement prior to termination.

17.Assignment. The Company may terminate this Agreement at any time in the event of its assignment by the Advisor except an assignment to a corporation, association, trust, or other successor organization which may take over the property and carry on the affairs of the Advisor; provided that, following such assignment, the persons who controlled the operations of the Advisor immediately prior to the assignment shall control the operation of the successor organization, including the performance of its duties under this Agreement, and such successor organization shall be bound by the same restrictions by which the Advisor was bound prior to such assignment. Such assignment or any other assignment of this Agreement by the Advisor shall bind the assignee hereunder in the same manner as the Advisor is bound hereunder. This

Agreement shall not be assignable by the Company without the prior written consent of the Advisor, except in the case of any assignment by the Company to a corporation or other organization which is the successor to the Company, in which case such successor shall be bound hereby and by the terms of said assignment in the same manner and to the same extent as the Company is bound hereby.

18.Default, Bankruptcy, Etc. of the Advisor. At the sole option of the Company, this Agreement may be terminated immediately upon written notice of such termination from the Trustees to the Advisor if any of the following events shall have occurred:

(a)the Advisor shall have violated any provision of this Agreement and, after written notice from the Trustees of such violation, shall have failed to cure such default within thirty (30) days;

(b)a petition shall have been filed against the Advisor for an involuntary proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, and such petition shall not have been dismissed within ninety (90) days of filing; or a court having jurisdiction shall have appointed a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Advisor for any substantial portion of its property, or ordered the winding upon or liquidation of its affairs, and such appointment or order shall not have been rescinded or vacated within ninety (90) days of such appointment or order; or

(c)the Advisor shall have commenced a voluntary proceeding under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall have made any general assignment for the benefit of creditors, or shall have failed generally to pay its debts as they became due.

The Advisor agrees that, if any of the events specified in Paragraphs (b) or (c) of this Section 18 shall occur, it will give written notice thereof to the Trustees within seven (7) days following the occurrence of such event.

19.Action Upon Termination. From and after the effective date of any termination of this Agreement pursuant to Sections 16, 17 or 18 hereof, the Advisor shall be entitled to no compensation for services rendered hereunder for the then-current term of this Agreement, but shall be paid, on a pro rata basis, all compensation due for services performed prior to such termination (reduced by the amount, if any, of the Fees to be refunded by the Advisor pursuant to Section 13 hereof, which section shall apply pro rata to the applicable portion of the fiscal year in which termination occurs in the event of a termination occurring at other than the end of the Company’s fiscal year. Upon such termination, the Advisor immediately shall:

(a)pay over to the Company all monies collected and held for the account of the Company by it pursuant to this Agreement, after deducting therefrom any accrued Fees (reduced by amounts owed by the Advisor to the Company pursuant to the last paragraph of Section 13 hereof) and reimbursements for its expenses to which it is then entitled;

(b)deliver to the Trustees a full and complete accounting, including a statement showing all sums collected by it and a statement of all sums held by it for the period commencing with the date following the date on its last accounting to the Trustees; and

(c)deliver to the Trustees all property and documents of the Company then in its custody or possession.

The amount of Fees paid to the Advisor upon termination shall be subject to adjustment pursuant to the following mechanism. On or before the 30th day after public availability of the Company’s annual audited financial statements for the fiscal year in which termination occurs, the Company shall deliver to the Advisor a Certificate reasonably acceptable to the Advisor and certified by an authorized officer of the Company setting forth (i) the Average Invested Real Estate Assets, Cash Available for Distribution to Shareholders and Funds From Operations for the Company’s fiscal year ended upon the immediately preceding December 31, and (ii) the Company’s computation of the Fees payable upon the date of termination (reduced by the aggregate amount of any excess expenses to be refunded pursuant to Section 13 hereof, which Section shall apply to the applicable portion of the fiscal year in which termination occurs in the event of a termination occurring at other than the end of the Company’s fiscal year.

If the annual Fees owed upon termination as shown in such Certificate exceed the Fees paid by the Company upon termination, the Company shall include its check for such deficit and deliver the same to the Advisor with such Certificate.

If the Annual Fees owed upon termination as shown in such Certificate are less than the Fees paid by the Company upon termination, the Advisor shall remit to the Company its check in an amount equal to such difference.

20.Trustee Action. Wherever action on the part of the Trustees is contemplated by this Agreement, action by a majority of the Trustees, including a majority of the Independent Trustees, shall constitute the action provided for herein.

21.Notices. Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is accepted by the party to whom it is given, and shall be given by being delivered at the following addresses to the parties hereto:

If to the Company:

Hospitality Properties Trust
400 Centre Street
Newton, MA 02458
Attention:  President

If to the Advisor:

Reit Management & Research LLC
400 Centre Street
Newton, MA 02458
Attention:  President

Such notice shall be effective upon its receipt by the party to whom it is directed. Either party hereto may at any time given notice to the other party in writing of a change of its address for purposes of this paragraph 21.

22.Amendments. The Agreement shall not be amended, changed, modified, terminated, or discharged in whole or in part except by an instrument in writing signed by each of the parties hereto, or by their respective successors or assigns, or otherwise as provided herein.

23.Successors and Assigns. This Agreement shall be binding upon any successors or permitted assigns of the parties hereto as provided herein.

24.Governing Law. The provisions of this Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts.

25.Captions. The captions included herein have been inserted for ease of reference only and shall not be construed to affect the meaning, construction or effect of this Agreement.

26.Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes and cancels any pre-existing agreements with respect to such subject matter.

27.Attorneys’ Fees. If any legal action is brought for the enforcement of this Agreement, or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions of this Agreement, the successful or prevailing party or parties shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that action in addition to any other relief to which it or they may be entitled.

[Remainder of page intentionally left blank.]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers, under seal, as of the day and year first above written.

HOSPITALITIES PROPERTIES TRUST
By:	/s/ John G. Murray
	Name: John G. Murray
	Title:   President
REIT MANAGEMENT & RESEARCH LLC
By:	/s/ Jennifer B. Clark
	Name: Jennifer B. Clark
	Title:   Vice President

SOLELY AS TO SECTION 15 HEREOF:

/s/ Barry M. Portnoy

Barry M. Portnoy

/s/ Gerard M. Martin

Gerard M. Martin

/s/ Adam D. Portnoy

Adam D. Portnoy

EX-10.16

Exhibit 10.16

AMENDED AND RESTATED DEPOSIT AGREEMENT

THIS AMENDED AND RESTATED DEPOSIT AGREEMENT (this “Agreement”) is made and entered into as of the 6th day of January, 2006 by and among HPT TRS IHG-1, Inc., a Maryland corporation (“Staybridge Owner”), HPT TRS IHG-2, Inc., a Maryland corporation (“IC Owner”), HPT IHG PR, Inc., a Puerto Rico corporation (“PR Landlord”), and HPT TRS IHG-3, Inc., a Maryland corporation (“FC Owner” and together with Staybridge Owner, IC Owner and PR Landlord, collectively, the “HPT Parties”), InterContinental Hotels Group Resources, Inc., a Delaware corporation (“Staybridge Manager”), IHG Management (Maryland) LLC, a Maryland limited liability company (“IHG Maryland”), InterContinental Hotels Group (Canada), Inc., a corporation under the laws of Ontario, Canada (“IHG Canada” and together with IHG Maryland, collectively, “IC Manager” and together with Staybridge Manager, collectively, the “IHG Parties”).

BACKGROUND STATEMENT

Staybridge Owner and Staybridge Manager entered into that certain Management Agreement dated as of July 1, 2003, and amended said Management Agreement by (i) that certain First Amendment to Management Agreement dated as of September 18, 2003, (ii) that certain Second Amendment to Management Agreement dated as of March, 2004, (iii) that certain Third Amendment to Management Agreement dated as of February 16, 2005, and (iv) that certain Fourth Amendment to Management Agreement dated as of January 6, 2006 (as so amended and as the same may hereafter be amended, modified or supplemented from time to time in accordance with the terms thereof, the “Staybridge Management Agreement”). Pursuant to Section 17.5 of the Staybridge Management Agreement, the Staybridge Owner is holding the “Deposit” to secure the performance by Staybridge Manager of the “Secured Obligations” (as such terms are defined in the Staybridge Management Agreement). As used in this Agreement, the term “Deposit” shall have the meaning ascribed to such term in the Staybridge Management Agreement for all purposes hereof and the term “Staybridge Secured Obligations” shall have the meaning ascribed to the term “Secured Obligations” in the Staybridge Management Agreement for all purposes hereof.

IC Owner and IHG Maryland entered into that certain Management Agreement, dated as of February 16, 2005, and (together with IHG Canada) amended said Management Agreement by that certain First Amendment to Management Agreement, dated as of May 31, 2005 (as so amended, the “Original IC Management Agreement”).

PR Landlord and InterContinental Hotels (Puerto Rico), Inc. (“PR Tenant”) entered into that certain Lease Agreement, dated as of February 16, 2005 (as the same has been, and may hereafter be, amended, modified or supplemented from time to time in accordance with the terms thereof, the “PR Lease”).

InterContinental Hotels Group PLC (“Guarantor”), a corporation organized and existing under the laws of England and Wales and the ultimate parent entity of each of the IHG Parties and PR Tenant, executed and delivered that certain Amended and Restated Consolidated Guaranty Agreement dated as of February 16, 2005 (the “Original PLC Guaranty”) in favor of Staybridge Owner, IC Owner, PR Landlord and Hospitality Properties Trust, a Maryland real estate investment trust.

IC Owner and IC Manager entered into that certain Amended and Restated Management Agreement, dated as of January 6, 2006 (as the same may hereafter be amended, modified or supplemented from time to time in accordance with the terms thereof, the “IC Management Agreement”), which amended and restated the Original IC Management Agreement, as further described in the IC Management Agreement.

Staybridge Owner, IC Owner, PR Landlord, Staybridge Manager and IC Manager entered into that certain Deposit Agreement, dated as of January 6, 2006 (the “Original Deposit Agreement”), pursuant to which the parties thereto agreed that the Deposit shall stand as security for IC Manager’s and PR Tenant’s observance and performance of certain covenants and agreements set forth in the IC Management Agreement and the PR Lease as well as the Staybridge Secured Obligations.

On or about the date hereof, FC Owner and IHG Maryland are entering into that certain Management Agreement in conjunction with FC Owner’s or its affiliate’s acquisition of certain hotels (as the same may hereafter be amended, modified or supplemented from time to time in accordance with the terms thereof, the “FC Management Agreement”).

On or about the date hereof, Guarantor is executing and delivering that certain Second Amended and Restated Consolidated Guaranty Agreement (as the same may hereinafter be amended, modified or supplemented from time to time in accordance with the terms thereof, the “PLC Guaranty”). The PLC Guaranty amends and restates the Original PLC Guaranty, as further described in the PLC Guaranty.

In consideration of (i) FC Owner’s or its affiliate’s acquisition of said hotels and FC Owner’s and IHG Maryland’s entering into the FC Management Agreement, (ii) IC Owner and IC Manager agreeing to replenish the Deposit pursuant to the terms of the IC Management Agreement, and (iii) FC Owner and IHG Maryland agreeing to replenish the Deposit pursuant to the terms of the FC Management Agreement, all of the parties hereto have agreed that the Deposit shall stand as security for IC Manager’s, PR Tenant’s and IHG Maryland’s observance and performance of certain covenants and agreements set forth in the IC Management Agreement, the PR Lease and the FC Management Agreement, as well as the Staybridge Secured Obligations. The IHG Parties and PR Tenant are all wholly-owned subsidiaries of Guarantor and acknowledge and agree that each has received good and valuable consideration for the respective rights and obligations set forth in this Agreement. The HPT Parties are all wholly-owned subsidiaries of Hospitality Properties Trust and acknowledge and agree that each has received good and valuable consideration for the respective rights and obligations set forth in this Agreement.

As hereinbelow provided, the parties hereto hereby intend that the Deposit shall be made available to satisfy the Staybridge Secured Obligations, the IC Secured Obligations (as hereinafter defined) and the FC Secured Obligations (as hereinafter defined) on the condition and to the extent that such obligations are not timely paid pursuant to the PLC Guaranty. In connection therewith, each of the Staybridge Management Agreement and the IC Management Agreement has been amended, and the FC Management Agreement has been executed,  to provide for the replenishment of the Deposit to the extent any portion of the Deposit shall be applied to the Staybridge Secured Obligations under the Staybridge Management Agreement or to the IC Secured Obligations or the FC Secured Obligations under this Agreement.

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NOW, THEREFORE, in consideration of the Staybridge Management Agreement, the IC Management Agreement and the FC Management Agreement and the mutual promises and covenants contained therein and herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree that the Original Deposit Agreement is hereby amended and restated as follows:

1.             Representations. Each party to this Agreement makes the following representations on behalf of such party (but not with respect to any other party to this Agreement): such party has duly and validly executed and delivered this Agreement; this Agreement constitutes the legal, valid and binding obligation of such party, enforceable against such party in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors; and the execution, delivery and performance of this Agreement have been duly authorized by all requisite action of such party and such execution, delivery and performance by such party will not result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of the property or assets of such party pursuant to the terms of, any indenture, mortgage, deed of trust, note, other evidence of indebtedness, agreement or other instrument to which such party is a party or by which such party or any property or assets of such party is bound, or violate any provision of law applicable to such party, or any order, writ, injunction, judgment or decree of any court applicable to such party or any order or other public regulation of any governmental commission, bureau or administrative agency applicable to such party.

2.             Deposit Availability. The Deposit is hereby agreed to stand as security for (i) the Staybridge Secured Obligations, (ii) the payment to IC Owner of all of the “Owner’s First Priority” as and when due under the IC Management Agreement determined without respect to Gross Revenue thereunder or Operating Profits thereunder, the timely performance of all of the covenants to be performed by IC Manager under the IC Management Agreement and the payment to PR Landlord of all of the “Minimum Rent” as and when due under the PR Lease and the timely performance of all of the covenants to be performed by the PR Tenant under the PR Lease (collectively, the “IC Secured Obligations”), and (iii) the payment to FC Owner of all of the “Owner’s First Priority” as and when due under the FC Management Agreement determined without respect to Gross Revenue thereunder or Operating Profits thereunder and the timely performance of all of the covenants to be performed by IHG Maryland under the FC Agreement (the “FC Secured Obligations”, and together with the Staybridge Secured Obligations and IC Secured Obligations, collectively, the “Secured Obligations”). Accordingly, the establishment and existence of the Deposit pursuant to the Staybridge Management Agreement notwithstanding, each of IC Owner, PR Landlord and FC Owner shall have the option to elect, in its sole discretion, whether and when to apply funds from the Deposit with respect to any of the IC Secured Obligations or FC Secured Obligations without regard to when and whether Staybridge Owner shall have made or shall be simultaneously electing whether and when to apply funds from the Deposit with respect to any of the Staybridge Secured Obligations; provided, however, none of Staybridge Owner, IC Owner, PR Landlord, FC Owner shall apply the Deposit to any of the Secured Obligations for which the Guarantor is responsible under the PLC Guaranty unless (a) the Guarantor shall have failed to pay any amount due

3

under the Guaranty for a period of five (5) days after notice, or (b) an event described in Sections 17.1(a), 17.1(b) or 17.1(c) of the Staybridge Management Agreement shall have occurred with respect to the Guarantor.

3.             Deposit Replenishment. Any other provision of the Staybridge Management Agreement, the IC Management Agreement or the FC Management Agreement to the contrary notwithstanding, in the event of any application of the Deposit pursuant to the terms of the Staybridge Management Agreement or this Agreement, the Deposit shall be replenished as required under the Staybridge Management Agreement by any or all of Staybridge Manager, IC Manager or IHG Maryland to the extent funds are available for such application in accordance with the terms of the Staybridge Management Agreement, the IC Management Agreement or the FC Management Agreement, as applicable, irrespective of whether the Deposit was applied pursuant to the Staybridge Management Agreement or this Agreement. That is, just as the Deposit is available to satisfy the Staybridge Secured Obligations, the IC Secured Obligations and the FC Secured Obligations, funds available under all of the Staybridge Management Agreement, the IC Management Agreement and the FC Management Agreement may be used to replenish the Deposit. Nothing contained in this Agreement is intended nor shall be construed to alter the provisions concerning the required amount of the Deposit at any given time. Notwithstanding any provisions in the Staybridge Management Agreement to the contrary, the balance of the Deposit shall not be returned to the Staybridge Manager until the satisfaction in full of all of the Secured Obligations.

4.             Subrogation. Each of Staybridge Manager, IC Manager and IHG Maryland hereby covenants and agrees that it will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against the other until such time as the Deposit has been fully replenished. Until the Secured Obligations have been satisfied in full, neither Staybridge Manager, IC Manager nor IHG Maryland shall have any right of subrogation, and each waives any defense it may have based upon any election of remedies by the HPT Parties which destroys their subrogation rights or their rights to proceed against one another for reimbursement, including, without limitation, any loss of rights any of them may suffer by reason of any rights, powers or remedies of the HPT Parties in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging the indebtedness. Until all obligations of the IHG Parties and PR Tenant pursuant to the Secured Obligations shall have been irrevocably paid and satisfied in full, each of Staybridge Manager, IC Manager and IHG Maryland waives any right to enforce any remedy which any of the HPT Parties now has or may in the future have against the other or the PR Tenant with respect to the Deposit, draws therefrom or the replenishment thereof.

5.             Construction. It is the intention of the parties hereto that the Deposit be available to benefit each of the HPT Parties as herein provided and that all of the IHG Parties shall have the obligations with respect to the Deposit correspondingly as set forth herein. Accordingly, in the event of any conflict between the terms and provisions of any of the Staybridge Management Agreement, the IC Management Agreement or the FC Management Agreement on the one hand and this Agreement on the other hand, the terms and provisions of this Agreement shall govern and control, but only to the extent necessary to give effect to the intent of the parties hereto, and the Staybridge Management Agreement, the IC Management Agreement and the FC Management Agreement shall remain unmodified and in full force and effect except to the extent necessary to give full effect to this Agreement.

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6.             General Provisions. This Agreement may be executed in one or more counterparts, all of which counterparts shall constitute but one and the same instrument. This Agreement shall be binding upon and shall inure to the benefit of the permitted successors in interest and the assigns of the parties hereto as provided in the Staybridge Management Agreement, the IC Management Agreement and the FC Management Agreement, as applicable. This Agreement, together with the Staybridge Agreement, the IC Management Agreement and the FC Management Agreement, collectively constitute the entire agreement of the parties with respect to the availability of the Deposit to the IC Secured Obligations and the FC Secured Obligations and the replenishment of the Deposit by IC Manager pursuant to the IC Management Agreement and IHG Maryland pursuant to the FC Management Agreement, and shall supersede and take the place of any other documents, agreement or understandings of the parties purporting to be in agreement relating to the subject matter hereof.

7.             Governing Law. This Agreement shall be governed by the laws of the State of Maryland.

8.             Restatement. This Agreement supercedes, amends and restates in its entirety the Original Deposit Agreement.

[Signatures on Following Pages]

5

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement effective as of the day and year first above written.

“STAYBRIDGE OWNER”
HPT TRS IHG-1, Inc.
By:	/s/  John G. Murray
			John G. Murray, Vice President
“IC OWNER”
HPT TRS IHG-2, Inc.
By:	/s/  John G. Murray
				John G. Murray, Vice President
“PR LANDLORD”
HPT IHG PR, Inc.
By:		/s/  John G. Murray
				John G. Murray, President
“FC OWNER”
HPT TRS IHG-3, Inc.
By:		/s/  John G. Murray
				John G. Murray, Vice President

[Signatures Continue on Next Page]

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“STAYBRIDGE MANAGER”
InterContinental Hotels Group Resources, Inc.
By:	/s/  Robert J. Chitty
				Robert J. Chitty, Vice President
“IHG MARYLAND”
IHG Management (Maryland) LLC
By:		/s/  Robert J. Chitty
					Robert J. Chitty, Vice President
“IHG CANADA”
INTERCONTINENTAL HOTELS GROUP (CANADA) INC.
By:			/s/  Robert J. Chitty
						Robert J. Chitty, Vice President

7

EX-10.17

Exhibit 10.17

MANAGEMENT AGREEMENT
BY AND

BETWEEN

HPT TRS IHG-1, INC.

AND

INTERCONTINENTAL HOTELS GROUP RESOURCES, INC.

Table of Contents

		Page
ARTICLE 1 DEFINITIONS		1
	1.1  8.1(c) Statement	1
	1.2  Accounting Principles	1
	1.3  Affiliate	1
	1.4  Agreed Upon Procedure Letter	1
	1.5  Authorized Mortgage	2
	1.6  Arbitration	2
	1.7  Award	2
	1.8  Bank Accounts	2
	1.9  Base Management Fee	2
	1.10  Base Year	2
	1.11  Brand	3
	1.12  Brand Standards	3
	1.13  Buildings	3
	1.14  Business Day	3
	1.15  Capital Replacements	3
	1.16  Capital Replacements Budget	3
	1.17  Code	3
	1.18  Collateral Agency Agreement	3
	1.19  Collateral Agent	3
	1.20  Competitor	4
	1.21  Condemnation	4
	1.22  Condemnor	4
	1.23  Consolidated Financials	4
	1.24  Consumer Price Index	4
	1.25  Controlling Interest	4
	1.26  Debt Service Coverage Ratio	4
	1.27  Deposit	4
	1.28  Disbursement Rate	4
	1.29  Effective Date	4
	1.30  Environmental Laws	4
	1.31  Environmental Notice	4
	1.32  Expiration Date	4
	1.33  Fiscal Month	5
	1.34  Fiscal Year	5
	1.35  Furniture, Fixtures and Equipment or FF&E	5
	1.36  Government Agencies	5
	1.37  Gross Revenues	5
	1.38  Guarantor	6
	1.39  Guaranty	6
	1.40  Hazardous Substances	6
	1.41  Hotel	6
	1.42  HPT	7
	1.43  IHG	7
	1.44  Incentive Management Fee	7
	1.45  Initial Term	7
	1.46  Initial Working Capital	7

i

1.47  Insurance Requirements	7
1.48  Interest Rate	7
1.49  Lease	7
1.50  Legal Requirements	7
1.51  Management Fees	7
1.52  Manager	8
1.53  Manager Default	8
1.54  Manager Event of Default	8
1.55  Material Repair	8
1.56  New Management Agreement	8
1.57  NOI	8
1.58  Officer’s Certificate	8
1.59  Opening Date	8
1.60  Operating Cost(s)	8
1.61  Operating Equipment	9
1.62  Operating Profit	9
1.63  Operating Standards	9
1.64  Operating Supplies	9
1.65  Owner	9
1.66  Owner’s Percentage Priority	10
1.67  Owner’s Priority	10
1.68  Parent	10
1.69  Person	10
1.70  Pledged Hotels	10
1.71  Priority Coverage Ratio	10
1.72  Purchase Agreement	10
1.73  Purchaser	10
1.74  Renewal Terms	10
1.75  Repairs	10
1.76  Replacement Property	11
1.77  Reservation System	11
1.78  Reserve Account	11
1.79  Reserve Percentage	11
1.80  Residual Distribution	11
1.81  Restricted Area	11
1.82  Restricted Period	11
1.83  Rooms Revenue	11
1.84  SARA	11
1.85  Secured Obligations	11
1.86  Services Fees	11
1.87  Sites	11
1.88  Subsidiary	11
1.89  Substitute Tenant	12
1.90  System Marks	12
1.91  Term	12
1.92  Transaction Documents	12
1.93  Transferred Hotels	12

ii

	1.94  Uniform System of Accounts	12
	1.95  Ultimate Parent	12
	1.96  Unsuitable for Its Permitted Use	12
	1.97  Working Capital	12
	1.98  Yearly Budget	12
ARTICLE 2 SCOPE OF AGREEMENT		13
	2.1  Engagement of Manager	13
	2.2  Additional Services	14
	2.3  Use of Hotels	15
	2.4  Right to Inspect	15
	2.5  Right of Offset	15
	2.6  Condition of the Hotels	15
ARTICLE 3 TERM AND RENEWALS		16
	3.1  Term	16
	3.2  Renewal Term	16
	3.3  Owner’s Termination Right at End of Term	16
ARTICLE 4 TITLE TO HOTEL		16
	4.1  Covenants of Title	16
	4.2  Non-Disturbance	17
	4.3  Financing	17
	4.4  Sale of a Hotel	19
	4.5  Sale of All the Hotels	20
	4.6  The Lease	20
	4.7  Restricted Sale	20
ARTICLE 5 REQUIRED FUNDS		20
	5.1  Working Capital	20
	5.2  Reserve Account	21
	5.3  Additional Requirements for Reserve	22
	5.4  Ownership of Replacements	22
	5.5  Manager Reserve Advances	22
	5.6  No Additional Contributions	23
ARTICLE 6 BRAND STANDARDS AND MANAGER’S CONTROL		23
	6.1  Brand Standards	23
	6.2  Manager’s Control	23
	6.3  Arbitration	23
ARTICLE 7 OPERATION OF THE HOTEL		23
	7.1  Permits	24
	7.2  Equipment and Supplies	24
	7.3  Personnel	24
	7.4  Sales, Marketing and Advertising	25
	7.5  Reservation and Communication Services	25
	7.6  Maintenance and Repairs	26
	7.7  Material Repairs	26
	7.8  Liens; Credit	27
	7.9  Real Estate and Personal Property Taxes	27
	7.10  Contest	28

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ARTICLE 8 FISCAL MATTERS		28
	8.1  Accounting Matters	28
	8.2  Yearly Budgets	30
	8.3  Bank Accounts	30
	8.4  Consolidated Financials	31
ARTICLE 9 FEES TO MANAGER		31
	9.1  Management Fees	31
	9.2  Services Fees	32
ARTICLE 10 DISBURSEMENTS		32
	10.1  Disbursement of Funds	32
	10.2  Residual Distribution	33
	10.3  Owner’s Priority	34
	10.4  Owner’s Percentage Priority	34
	10.5  No Interest	34
	10.6  Amounts Outstanding at End of Term	34
	10.7  Survival	34
ARTICLE 11 CERTAIN OTHER SERVICES		35
	11.1  Optional Services	35
	11.2  Purchasing	35
ARTICLE 12 SIGNS AND SERVICE MARKS		35
	12.1  Signs	35
	12.2  System Marks	35
	12.3  System Mark Litigation	36
ARTICLE 13 INSURANCE		36
	13.1  Insurance Coverage	36
	13.2  Insurance Policies	38
	13.3  Insurance Certificates	39
	13.4  Insurance Proceeds	39
	13.5  Manager’s Insurance Program	39
ARTICLE 14 INDEMNIFICATION AND WAIVER OF SUBROGATION		39
	14.1  Indemnification	39
	14.2  Waiver of Subrogation	39
	14.3  Survival	40
ARTICLE 15 DAMAGE TO AND DESTRUCTION OF THE HOTEL		40
	15.1  Termination	40
	15.2  Restoration	41
ARTICLE 16 CONDEMNATION		41
	16.1  Total Condemnation	41
	16.2  Partial Condemnation	42
	16.3  Temporary Condemnation	42
	16.4  Effect of Condemnation	43
ARTICLE 17 DEFAULT AND TERMINATION		43
	17.1  Manager Events of Default	43
	17.2  Remedies for Manager Defaults	44
	17.3  Remedies for Owner Defaults	45
	17.4  Post Termination Obligations	45
	17.5  Deposit	47

iv

ARTICLE 18 NOTICES		48
	18.1  Procedure	48
ARTICLE 19 RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS		49
	19.1  Relationship	49
	19.2  Further Actions	50
ARTICLE 20 APPLICABLE LAW		50
ARTICLE 21 SUCCESSORS AND ASSIGNS		50
	21.1  Assignment	50
	21.2  Binding Effect	51
ARTICLE 22 RECORDING		51
	22.1  Memorandum of Agreement	52
	ARTICLE 23 FORCE MAJEURE	52
	23.1  Operation of Hotel	52
	23.2  Extension of Time	52
ARTICLE 24 GENERAL PROVISIONS		52
	24.1  Trade Area Restriction	52
	24.2  Environmental Matters	53
	24.3  Authorization	53
	24.4  Severability	54
	24.5  Merger	54
	24.6  Formalities	54
	24.7  Consent to Jurisdiction; No Jury Trial	54
	24.8  Performance on Business Days	55
	24.9  Attorneys’ Fees	55
	24.10  Section and Other Headings	55
	24.11  Documents	55
	24.12  Remedies Not Cumulative	55
	24.13  No Political Contributions	55
	24.14  REIT Qualification	55
	24.15  Further Compliance with Section 856(d) of the Code	56
	24.16  Adverse Regulatory Event	56
	24.17  Commercial Leases	57
	24.18  Nonliability of Trustees	57
	24.19  Arbitration	58
	24.20  Estoppel Certificates	59
	24.21  Confidentiality	59
	24.22  Hotel Warranties	60

v

MANAGEMENT AGREEMENT

THIS MANAGEMENT AGREEMENT (this “Agreement”) is made and entered into as of July 1, 2003, by and between HPT TRS IHG-1, INC., a Maryland corporation (“Owner”), and INTERCONTINENTAL HOTELS GROUP RESOURCES, INC. a Delaware corporation (“Manager”).

W I T N E S S E T H

WHEREAS, pursuant to the Purchase Agreement (this and other capitalized terms used and not otherwise defined herein having the meanings ascribed to such terms in Article 1), on the Effective Date: (a) Purchaser is acquiring the Hotels from Manager or its Affiliate(s); (b) Purchaser and Owner, its Affiliate, are entering into the Lease; and (c) Owner and Manager are entering into this Agreement; and

WHEREAS, Owner wishes to engage Manager and Manager wishes to be engaged to manage and operate the Hotels, subject to and upon the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are herein acknowledged, Owner and Manager, intending to be legally bound, hereby agree as follows:

ARTICLE 1

DEFINITIONS

Capitalized Term used in this Agreement and not otherwise defined herein shall have the meanings set forth below, in the Section of this Agreement referred to below, or in such other document or agreement referred to below:

1.1“8.1(c) Statement”  shall have the meaning given such term in Section 8.1(c).

1.2“Accounting Principles”  shall mean generally accepted accounting principles, as adopted in the United States of America, consistently applied.

1.3“Affiliate”  shall mean, with respect to any Person, (a) in the case of any such Person which is a partnership, any partner in such partnership; (b) in the case of any such Person which is a limited liability company, any member of such company; (c) any other Person which is a Parent, or Subsidiary or a Subsidiary of a Parent with respect to such Person or to one or more of the persons referred to in the preceding clauses (a) and (b), and; (d) any other Person who is an officer, director, trustee or employee of, or partner in, such Person or any Person referred to in the preceding clauses (a), (b) and (c).

1.4“Agreed Upon Procedure Letter”  shall mean, a letter from Ernst & Young or another firm of independent certified public accountant (the “auditor”) selected by Manager and approved by Owner (which approval shall not be unreasonably withheld or delayed), which letter shall, subject to the limitations and conditions imposed by the auditor,

address the following components and such other reasonable matters as Owner, and the auditor shall reasonably agree:

(a)That auditor has tested Manager’s systems of internal controls.

(b)That auditor has verified that the information provided was generated from the same reporting systems as Manager uses for its regular periodic accounting and reporting.

(c)That auditor has verified the mathematical accuracy of the 8.1(c) Statement.

(d)That auditor has recomputed the annual calculation of Management Fees, Service Fees, contributions to the Reserve Account, expenditures from the Reserve Account, Owner’s Percentage Priority and the Residual Distribution.

(e)That auditor has confirmed the Hotels subjected to audit procedures by Manager’s internal audit department, if any, and reviewed work papers provided in connection therewith. If auditor has performed hotel level audit procedures at any Hotel, auditor shall identify those Hotels and list the procedures performed and results obtained. In any event at least three Hotels shall be subjected to audit procedures each Fiscal Year by either internal audit or the auditor.

1.5“Authorized Mortgage”  shall mean any first mortgage, first deed-of-trust or first deed to secure debt and other related security documents granted in connection therewith now or hereafter granted by Purchaser to secure a loan to, or other debt of, Purchaser or its Affiliates which is made by an institutional lender, investment bank, publicly traded investment fund or other similar Person regularly making loans secured by hotels or incurred in connection with the issuance of a mortgage backed security, which loan or debt provides for (i) level payments of interest and principal and (ii) amortization and other terms which are commercially reasonable.

1.6“Arbitration”  shall mean an arbitration conducted in accordance with the terms of Section 24.19.

1.7“Award”  shall have the meaning given such term in the Lease.

1.8“Bank Accounts”  shall mean one or more bank accounts established for the operation of the Hotels in Owner’s name at a bank selected by Manager and approved by Owner.

1.9“Base Management Fee”  shall mean seven percent (7%) of the aggregate Gross Revenues at the Hotels in each Fiscal Year during Term.

1.10“Base Year”  shall mean, for each Hotel, the 2004 Fiscal Year; provided, however, if there shall occur a casualty, condemnation or other force majeure event with respect to a Hotel which causes a material decline in Gross Revenues for such Hotel for the 2004 Fiscal Year or a force majeure event nationally or in any relevant market that results in a ten percent (10%) annual decline in REVPAR for the Upscale Segment (or other appropriate segment) as calculated by Smith Travel Research, nationally or in the relevant market, which causes a material decline in Gross Revenues for any Hotel, the

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Base Year for such Hotel shall be adjusted to be the first full Fiscal Year of operation of such Hotel after the termination of any such casualty, condemnation or force majeure event.

1.11“Brand”  shall mean, collectively, the Staybridge Suites hotel service marks, the Brand Standards, and all of the attributes and features customarily associated with the Staybridge Suites hotel chain in North America from time to time.

1.12“Brand Standards”  shall mean the standards of operation, as amended from time to time, in effect at substantially all hotels which are operated under the Staybridge Suites name, which standards shall include, but not be limited to, standards of operation from time to time required of owners of similar hotels or may be specified in manuals and other guidelines provided by the owner of the System Marks or its Affiliates.

1.13“Buildings”  shall mean, collectively, all buildings, structures and improvements now or hereafter located on the Sites, and all fixtures and equipment attached to, forming a part of and necessary for the operation of such buildings, structures and improvements as a hotel (including, without limitation, heating, lighting, sanitary, air-conditioning, laundry, refrigeration, kitchen, elevator and similar items) having guest sleeping rooms, each with bath, and such (i) restaurants, bars, banquet, meeting and other public areas; (ii) commercial space, including concessions and shops; (iii) parking facilities and areas; (iv) storage and service areas; (v) recreational facilities and areas; (vi) permanently affixed signage; (vii) public grounds and gardens; and (viii) other facilities and appurtenances, as may hereafter be attached to and form a part of such building, structures an improvements in accordance with this Agreement.

1.14“Business Day”  shall mean any day other than Saturday, Sunday, or any other day on which banking institutions in The Commonwealth of Massachusetts are authorized by law or executive action to close.

1.15“Capital Replacements”  shall mean, collectively, replacements and renewals to the FF&E and Repairs which are normally capitalized under the Accounting Principles.

1.16“Capital Replacements Budget”  shall mean the annual budget for Capital Replacements at the Hotels, covering a Fiscal Year, as prepared by Manager and approved by Owner as part of a Yearly Budget. References to Yearly Budget shall be deemed to incorporate the Capital Replacement Budget unless specifically excluded.

1.17“Code”  shall mean the Internal Revenue Code of 1986 and the Treasury Regulations promulgated thereunder, each as from time to time amended.

1.18“Collateral Agency Agreement”  shall have the meaning given such term in the Guaranty.

1.19“Collateral Agent”  shall have the meaning given such term in the Guaranty.

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1.20“Competitor”  shall mean any Person which owns directly or through an Affiliate a hotel brand, trade name, system, or chain having at least fifteen (15) hotels (excluding a mere franchisee or mere passive investor).

1.21“Condemnation”  shall have the meaning given such term in the Lease

1.22“Condemnor”  shall have the meaning given such term in the Lease.

1.23“Consolidated Financials”  shall mean for any fiscal year or any interim period of any Person, annual or interim financial statements of such Person prepared on a consolidated basis, including such Person’s consolidated balance sheet and the related statements of income and cash flows, all in reasonable detail, and setting forth in comparative form the corresponding figures for the corresponding period in the preceding fiscal year, and prepared in accordance with the Accounting Principles throughout the periods reflected or if such Person’s principal place of business is the United Kingdom, in accordance with generally accepted accounting principles, as adopted in the United Kingdom, consistently applied throughout the periods reflected provided that any such financial statement which is audited shall contain a reconciliation of any differences between such accounting principles and Accounting Principles.

1.24“Consumer Price Index”  shall mean the Consumer Price Index for all Urban Consumers, U.S. City Average, published by the United States Bureau of Labor Statistics.

1.25“Controlling Interest”  shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the business, management or policies of such Person.

1.26“Debt Service Coverage Ratio”  shall mean, with respect to any loan or other debt secured by an Authorized Mortgage, the quotient obtained by dividing (a) the NOI of the properties securing such loan or other debt for the twelve (12) months ending on such date by (b) regularly scheduled interest and principal payments projected to be paid thereunder during the first (1st) twelve (12) months after the first day of the month next after the date on which such Authorized Mortgage is granted divided.

1.27 “Deposit”  shall have the meaning given such term in Section 17.5.

1.28“Disbursement Rate”  shall mean a per annum rate equal to the greater of (i) the sum of the per annum rate for twenty (20) year U.S. Treasury Obligations as published in The Wall Street Journal, plus three hundred (300) basis points and (ii) ten percent (10%).

1.29“Effective Date”  shall mean the date hereof.

1.30“Environmental Laws”  shall have the meaning given such term in Section 24.2(b).

1.31“Environmental Notice”  shall have the meaning given such terms in Section 24.2(a).

1.32“Expiration Date”  shall mean the date on which the Term shall expire.

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1.33“Fiscal Month”  shall mean each calendar month in the Term or each partial calendar month in the Term.

1.34“Fiscal Year”  shall mean each calendar year in the Term and each partial calendar year in the Term.

1.35“Furniture, Fixtures and Equipment” or “FF&E”  shall mean, collectively, all furniture, furnishings and equipment (except Operating Equipment and real property fixtures) now or hereafter located and installed in or about the Hotels which are used in the operation thereof as hotels in accordance with the standards set forth in this Agreement, including, without limitation (i) office furnishings and equipment; (ii) specialized hotel equipment necessary for the operation of any portion of the Building as a Staybridge Suites hotel, including equipment for kitchens, laundries, dry cleaning facilities, bars, restaurants, public rooms, commercial space, parking areas, and recreational facilities; and (iii) all other furnishings and equipment hereafter located and installed in or about the Buildings which are used in the operation of the Buildings as a Staybridge Suites hotel in accordance with the standards set forth in this Agreement.

1.36“Government Agencies”  shall mean any court, agency, authority, board (including, without limitation, environmental protection, planning and zoning), bureau, commission, department, office or instrumentality of any nature whatsoever of any governmental or quasi-governmental unit of the United States or any state or any county or any political subdivision of any of the foregoing, whether now or hereafter in existence, having jurisdiction over Owner, the Sites or the Hotels.

1.37“Gross Revenues”  shall mean for any period with respect to each Hotel, all revenues and income of any nature derived directly or indirectly from such Hotel or from the use or operation thereof, including without limitation room sales; food and beverage sales (regardless of whether Owner, Manager or any of their Affiliates own the items being sold); telephone, telegraph, fax and internet revenues; rental or other payments from lessees, subleases, concessionaires and others occupying or using space or rendering services at such Hotel (but not the gross receipts of such lessees, subleases or concessionaires); and the actual cash proceeds of business interruption, use, occupancy or similar insurance; provided, however, that Gross Revenues shall not include the following (and there shall be appropriate deductions made in determining Gross Revenues for):  gratuities or service charges in the nature of a gratuity added to a customer’s bill; federal, state or municipal excise, sales or use taxes or any other taxes collected directly from patrons or guests or included as part of the sales price of any goods or services; interest received or accrued with respect to the funds in the Reserve Account or (other than for purposes of calculating the Incentive Management Fee and the Residual Distribution) the other operating accounts of the Hotels; any refunds, rebates, discounts and credits of a similar nature, given, paid or returned in the course of obtaining Gross Revenues or components thereof; insurance proceeds (other than proceeds from business interruption or other loss of income insurance; condemnation proceeds (other than for a temporary taking); credits or refunds made to customers, guests or patrons; sums and credits received by Owner for lost or damaged merchandise; proceeds from the sale or other disposition of a Hotel, any part thereof, of

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FF&E or any other assets of the Hotels; or proceeds of any financing or re-financing; the Initial Working Capital and any other matters specifically excluded from Gross Revenues pursuant to this Agreement.

1.38“Guarantor”  shall mean the Guarantor under the Guaranty.

1.39“Guaranty”  shall mean the Guaranty Agreement of even date herewith made by IHG for the benefit of, inter alia, Owner, as the same may be amended, supplemented or replaced from time to time.

1.40“Hazardous Substances”  shall mean any substance:

(a)the presence of which requires or may hereafter require notification, investigation or remediation under any federal, state or local statute, regulation, rule, ordinance, order, action or policy; or

(b)which is or becomes defined as a “hazardous waste,” “hazardous material” or “hazardous substance” or “pollutant” or “contaminant” under any present or future federal, state or local statute, regulation, rule or ordinance or amendments thereto including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.) and the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) and the regulations promulgated thereunder; or

(c)which is toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes regulated by any governmental authority, agency, department, commission, board, agency or instrumentality of the United States, any state of the United States, or any political subdivision thereof; or

(d)the presence of which at a Hotel causes or materially threatens to cause an unlawful nuisance upon such Hotel or to adjacent properties or poses or materially threatens to pose a hazard to such Hotel or to the health or safety of persons on or about such Hotel; or

(e)without limitation, which contains gasoline, diesel fuel or other petroleum hydrocarbons or volatile organic compounds; or

(f)without limitation, which contains polychlorinated biphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or

(g)without limitation, which contains or emits radioactive particles, waves or material; or

(h)without limitation, constitutes materials which are now or may hereafter be subject to regulation pursuant to the Material Waste Tracking Act of 1988, or any applicable laws promulgated by any Government Agencies.

1.41“Hotel”  shall mean each Hotel located at a Site including all of the Owner’s interest in such Site, the Building there, the Furniture, Fixtures and Equipment there, the Operating

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Equipment there and the Operating Supplies there; provided, however, upon the termination of the Agreement with respect to less than all of the Hotels, pursuant to the terms hereof or otherwise, the term “Hotel” shall, with respect to the obligation of the parties thereafter accruing, only refer to a Hotel with respect to which this Agreement is in full force and effect.

1.42“HPT”  shall mean Hospitality Properties Trust, a Maryland real estate investment trust, together with its successors and permitted assigns.

1.43“IHG”  shall mean Intercontinental Hotels Group PLC, its successors and assigns.

1.44“Incentive Management Fee”  shall mean for any Fiscal Year, fifty percent (50%) of the excess, if any, of Gross Revenues from all of the Hotels in excess of the applications thereof made pursuant to Sections 10.1(a) through and including 10(n).

1.45“Initial Term”  shall mean the period commencing on the Effective Date and ending on the last day of the month in which occurs the day that is twenty (20) years after the Effective Date.

1.46“Initial Working Capital”  shall have the meaning given to such term in Section 5.1.

1.47“Insurance Requirements”  shall mean all terms of any insurance policy required by this Agreement and all requirements of the issuer of any such policy and all orders, rules and regulations and any other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) binding upon the Hotels.

1.48“Interest Rate”  shall mean a rate, not to exceed the maximum legal interest rate, equal to the greater of (i) twelve (12%) percent per annum and (ii) two percent (2%) per annum in excess of the Disbursement Rate determined as of the first day that interest accrues on any amount to which such Interest Rate is to be applied.

1.49“Lease”  shall mean the Lease Agreement dated as of the Effective Date, by and between HPT IHG Properties Trust and Owner, as the same may be amended from time to time in accordance with the terms of this Agreement.

1.50“Legal Requirements”  shall mean all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees, injunctions and requirements affecting Owner(excluding any requirements which affect Owner’s status as a real estate investment trust), a Hotel or the maintenance, construction, alteration, management or operation thereof, whether now or hereafter enacted or in existence, including, without limitation, (a) all permits, licenses, authorizations, certificates and regulations necessary to operate a Hotel, (b) all covenants, agreements, restrictions and encumbrances, (c) all Environmental Laws and (d) the outcome of any Arbitration.

1.51“Management Fees”  shall mean, collectively, the Base Management Fee and the Incentive Management Fee.

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1.52“Manager”  shall have the meaning given such term in the preamble to this Agreement.

1.53“Manager Default”  shall mean a Manager Event of Default or any other circumstances with which the giving of notice, the passage of time or both would constitute a Manager Event of Default or otherwise entitle Owner to terminate this Agreement in its entirety pursuant to the terms hereof.

1.54“Manager Event of Default”  shall have the meaning given such term in Section 17.1.

1.55“Material Repair”  shall mean a Repair the cost which exceeds $250,000; provided, however, on January 1 of each year starting in 2005 said $250,000 shall be adjusted to reflect the percentage change in the Consumer Price Index since the prior January 1.

1.56“New Management Agreement”  shall have the meaning given such term in Section 4.4.

1.57“NOI”  shall mean, with respect to any property, for any period, the Gross Operating Profit (as defined in the Uniform System of Accounts) of such property for such period net of, for such period and such property, real and personal property taxes and casualty and liability insurance premiums, an imputed reserve for capital replacements equal to five percent (5%) of gross revenues, an imputed management fee equal to three percent (3%) of gross revenues and an imputed royalty fee of five percent (5%) of room revenues.

1.58“Officer’s Certificate”  shall mean as to any Person, a certificate of the chief executive officer, chief financial officer or chief accounting officer of such Person, duly authorized, accompanying the financial statements required to be delivered by such Person pursuant to Sections 8.1 and 17.4, in which such officer shall certify to such officer’s best knowledge (a) that such statements have been properly prepared in accordance with the Accounting Principles, (b) in the event that the certifying party is an officer of IHG or another Guarantor, that such statements are true, correct and complete in all material respects and fairly present the consolidated financial condition of such Person at and as of the dates thereof and the results of its and their operations for the periods covered thereby and that there is no default on the part of the Guarantor under the Guaranty, and (c) in the event that the certifying party is an officer of Manager and the certificate is being given in such capacity, that such statements fairly present the financial operation of the Hotels.

1.59“Opening Date”  shall mean for each Hotel, the date set forth as such on Exhibit B for such Hotel.

1.60“Operating Cost(s)”  shall mean, collectively, all costs and expenses of the Hotels (regardless of whether the same is incurred by Owner, Purchaser or Manager) that are normally charged as an operating expense under Accounting Principles, including, without limitation:

(i)the cost of Operating Supplies, wages, salaries and employee fringe benefits, advertising and promotional expenses, the cost of personnel training programs, utility

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and energy costs, operating licenses and permits, maintenance costs, and equipment rentals;

(ii)all expenditures made for maintenance and repairs to keep the Hotel in good condition and repair (other than Capital Replacements);

(iii)premiums for insurance required hereunder;

(iv)the Services Fees;

(v)real estate and personal property taxes and expenses except to the extent expressly specified otherwise herein;

(vi)audit, legal and accounting fees and expenses except to the extent expressly specified otherwise herein; and

(vii)rent or lease payment for equipment used at the Hotels in the operation thereof.

Notwithstanding anything contained herein to the contrary, Operating Costs shall exclude:  (a) the Base Management Fee and the Incentive Management Fee; (b) items expressly excluded from Operating Costs pursuant to the terms hereof; (c) items for which Manager or its Affiliates are to indemnify Purchaser or Owner; (d) items for which Owner or its Affiliates are to indemnify Manager (e) items for which Manager or its Affiliates has expenses agreed under the Transaction Documents to be liable at its own cost and expense; (f) amounts payable to Owner or its Affiliates under the Purchase Agreement or the Transaction Documents or for periods not included in the Term; (g) any reimbursement of advances made by Manager or Owner; (h) the cost of Capital Replacements; (i) the Minimum Rent and the Additional Rent under the Lease; (j) debt service on any loan or other debt secured by an Authorized Mortgage or other financing obtained by Purchaser, Owner or Manager other than equipment financing permitted hereunder; and (k) except as provided in Sections 2.2, 6.1 or 11.1, the cost of providing any services by the Manager or its Affiliates using their own personnel to the Hotels which are not performed at the Hotels; and (l) any cost incurred in connection with the sale of the Hotels from Manager to Owner including, without limitation, any expense incurred in connection with performing obligations under the Purchase Agreement or any agreement, instrument, indemnity or undertaking executed and delivered by any IHG Party in connection with the Closing thereunder.

1.61“Operating Equipment”  shall have the meaning given to the term “Property and Equipment” under the Uniform System of Accounts.

1.62“Operating Profit”  shall mean for any period, the excess, if any, of Gross Revenues for all of the Hotels for such period over the sum of Operating Costs for such Period.

1.63“Operating Standards”  shall have the meaning given such term in Section 2.1.

1.64“Operating Supplies”  shall have the meaning given to the term “Inventories” under the Uniform System of Accounts.

1.65“Owner”  shall have the meaning given such term in the preamble to this Agreement and shall include its successors and assigns.

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1.66“Owner’s Percentage Priority”  shall mean, for each Fiscal Year after the 2004 Fiscal Year, an amount, not less than zero ($0) equal to the aggregate of the sum of seven and one-half percent (7.5%) of the Gross Revenues of each Hotel for such Fiscal Year in excess of the Gross Revenues for such Hotel for its Base Year.

1.67“Owner’s Priority”  shall mean an annual amount equal to the sum of (a) Sixteen Million Eight Hundred Seventy Two Thousand Dollars ($16,872,000) per annum plus, (b) effective on the date of each disbursement by Purchaser or Owner pursuant to Sections 5.2 (c), 15.2 (in excess of net insurance proceeds) or 16.2 (in excess of the Award) hereof, an amount equal to the amount so disbursed multiplied by the Disbursement Rate (determined as of the dates on which such sums are advanced) plus, (c) effective as of the first day of the first Renewal Term, the amount, if any, to be added to the Owner’s Priority pursuant to Sections 17.5(b) or 17.5(d). Owner’s Priority shall be subject to further adjustment as provided in Section 15.1(c).

1.68“Parent”  shall mean with respect to any Person, any Person who owns directly, or indirectly through one or more Subsidiaries or Affiliates, greater than fifty percent (50%) of the voting or beneficial interest in, or otherwise has the right or power (whether by contract, through ownership of securities or otherwise) to control, such Person.

1.69“Person”  shall mean any individual or entity, and the heirs, executors, administrators, legal representatives, successors and assigns of such individual or entity where the context so admits.

1.70“Pledged Hotels”  shall mean, with respect to any loan or other debt secured by an Authorized Mortgage, collectively, the Hotels which secure such loan or other debt.

1.71“Priority Coverage Ratio”  shall mean for any period, for any Hotel or group of Hotels, the quotient of (a) the excess of Gross Revenue for such Hotel or group of Hotels for such period over amounts distributed or applied for such period pursuant to Sections 10.1(a), (b), (f) (h) and (i), of this Agreement allocated to such Hotel or group of Hotels (as applicable), divided by (b) the sum of the Owner’s Priority allocated to such Hotel or group of Hotels (as applicable)for such period, plus the Owner’s Percentage Priority for such period allocated to such Hotels or group of Hotel (as applicable), plus, for purposes of Section 17.5(b) only, any increase in the Owner’s Priority that will occur upon the return of the Deposit to Manager pursuant to that Section.

1.72“Purchase Agreement”  shall mean that certain Purchase and Sale Agreement between HPT and Manager or its Affiliate(s) pursuant to which Purchaser has on the Effective Date acquired the Hotels from Manager or its Affiliate(s).

1.73“Purchaser”  shall mean the Landlord under the Lease.

1.74“Renewal Terms”  shall mean any period of years extending the Term of this Agreement, commencing upon the expiration of the Initial Term or any extensions thereto, as provided in Article 3.

1.75“Repairs”  shall have the meaning given such term in Section 7.6.

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1.76“Replacement Property”  shall mean a Staybridge Suite hotel or other type of hotel mutually acceptable to the parties acquired by Purchaser in substitution for a Hotel with respect to which this Agreement was terminated pursuant to Section 16.1.

1.77“Reservation System”  shall mean a computerized network of high speed terrestrial and satellite-linked hardware and data lines connecting hotels, central reservation centers, data processing centers and travel agencies which provides reservation services to the Staybridge Suites hotel chain in North America.

1.78“Reserve Account”  shall mean an interest-bearing account established for funds to be held in reserve for Capital Replacements in Purchaser’s name at a bank selected by Purchaser.

1.79“Reserve Percentage”  shall mean with respect to each Hotel, the following percentages for the following periods:

Period after first day of the Fiscal Month following such Hotel’s Opening Date	Reserve Percentage
0 – 12 months	2	%
13 – 24 months	3	%
25 – 36 months	4	%
37th month and thereafter	5	%

1.80“Residual Distribution”  shall mean amounts to be distributed to Owner pursuant to Section 10.2.

1.81“Restricted Area”  shall mean, for any Hotel, the area around such Hotel depicted on Exhibit D.

1.82“Restricted Period”  shall mean, for each Hotel, the period ending on the third (3rd) anniversary of the Effective Date.

1.83“Rooms Revenue”  shall mean all revenue derived from the rental of guest rooms in a Hotel determined in accordance with the Accounting Principles.

1.84“SARA”  shall mean the Superfund Amendments and Reauthorization Act of 1986.

1.85“Secured Obligations”  shall have the meaning given such term in Section 17.5.

1.86“Services Fees”  shall mean the fees specified in Section 9.2.

1.87“Sites”  shall mean the parcels of real estate more particularly described on Exhibit A.

1.88“Subsidiary”  shall mean with respect to any Person, any entity (a) in which such Person owns directly, or indirectly, greater than twenty percent (20%) of the voting or beneficial interest or (b) which such Person otherwise has the right or power to control (whether by contract, through ownership of securities or otherwise).

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1.89“Substitute Tenant”  shall have the meaning given and term in Section 4.2.

1.90“System Marks”  shall mean all service marks, trademarks, copyrights, trade names, logo types, commercial symbols, patents or other similar rights or registrations now or hereafter held, applied for or licensed by Manager or any Affiliate of Manager in connection with the Staybridge Suites brand of hotels.

1.91“Term”  shall mean the term of this Agreement as it may be extended or terminated.

1.92“Transaction Documents”  shall mean, collectively, this Agreement, the Purchase Agreement, any agreement, instrument, indemnity or undertaking executed and delivered by an IHG Party in connection with the Closing, the Guaranty and the Collateral Agency Agreement.

1.93“Transferred Hotels”  shall have the meaning given such term in Section 4.4.

1.94“Uniform System of Accounts”  shall mean the Uniform System of Accounts for the Lodging Industry, Ninth Revised Edition, 1996, as published by the Educational Institute of the American Hotel and Motel Association, as it may be amended from time to time.

1.95“Ultimate Parent”  shall mean, with respect to any Person, each Parent of such Person who in turn has no Parent.

1.96“Unsuitable for Its Permitted Use”  shall mean with respect to a Hotel, a state or condition of such Hotel such that (a) following any damage or destruction involving such Hotel, such Hotel cannot be operated in the good faith judgment of Manager or Owner on a commercially practicable basis and it cannot reasonably be expected to be restored to substantially the same condition as existed immediately before such damage or destruction and otherwise as required under Article 15 hereof, using only the net proceeds of insurance obtained in connection therewith and other funds that Owner or Manager elect to provide pursuant to the terms of Article 15 hereof within twelve (12) months following such damage or destruction or such shorter period of time as to which business interruption insurance is available to cover amounts payable to Owner hereunder and other costs related to the Hotel following such damage or destruction, or (b) as the result of a partial taking by Condemnation, such Hotel cannot be operated, in the good faith judgment of Manager or Owner on a commercially practicable basis in light of then existing circumstances.

1.97“Working Capital”  shall mean funds that are used (or held for use) in the day-to-day operation of the business of the Hotels, including, without limitation, change and petty cash funds, amounts deposited in operating bank accounts, receivables, amounts deposited in payroll accounts, prepaid expenses and funds required to maintain Operating Supplies, less accounts payable and accrued current liabilities, exclusive of any funds in the Reserve Account.

1.98“Yearly Budget”  shall mean, with respect to each Hotel, the annual operating budget of such Hotel, covering a Fiscal Year, as prepared by Manager in accordance with the Accounting Principles and approved by Owner. Such budget shall include an operating

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budget, a business plan and a Capital Replacement Budget. Without limiting the generality of the foregoing, the Yearly Budget shall include a projection of the estimated financial results of the operation of each Hotel for the Fiscal Year. Such projection shall project the estimated Gross Revenues, departmental profits, Operating Costs and Operating Profit for the Fiscal Year for each Hotel.

ARTICLE 2

SCOPE OF AGREEMENT

2.1Engagement of Manager. Subject to the terms of this Agreement, Owner hereby grants to Manager the sole and exclusive right to supervise and direct the management and operation of the Hotels for the Term. Manager hereby accepts such grant and agrees that it will control, supervise and direct the management and operation of the Hotels, in an efficient and economical manner consistent with standards prevailing in well managed hotels similar to the Hotels, including all activities in connection therewith which are customary and usual to such an operation (all of the foregoing, collectively, the “Operating Standards”). Subject to the terms and conditions of this Agreement, the Operating Standards and the Brand Standards, Manager shall have the right to determine operating policy, standards of operation, quality of service and any other matters affecting customer relations or management and operation of the Hotels. Without limiting the generality of the foregoing, and in addition to the other functions to be performed by Manager pursuant to this Agreement, Manager shall, in connection with the Hotels and in accordance with the Brand Standards, the Operating Standards and the terms of this Agreement, perform each of the following functions, provided, however, except as otherwise set forth in this Agreement, the costs and expenses of performing the following functions shall be Operating Costs:

(a)Establish and revise, as necessary, administrative policies and procedures, including policies and procedures for the control of revenue and expenditures, for the purchasing of supplies and services, for the control of credit, and for the scheduling of maintenance, and verify that the foregoing procedures are operating in a sound manner.

(b)Manage expenditures to replenish Operating Supplies and Operating Equipment, make payments on accounts payable and collect accounts receivable.

(c)Arrange for and supervise public relations and advertising and prepare marketing plans.

(d)Procure all Operating Supplies and replacement Operating Equipment.

(e)Provide, or cause to be provided, risk management services relating to the types of insurance required to be obtained or provided by Manager under this Agreement.

(f)Reasonably cooperate (provided that except as herein expressly provided Manager shall not be obligated to enter into any amendments of this Agreement or, unless Owner agrees to reimburse Manager therefore, to incur any material expense including any internal expenses) in any attempt(s) to: (i) effectuate a sale or other transfer of a Hotel

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subject to the terms of Sections 4.4 and 4.5 of this Agreement; or (ii) to obtain any Authorized Mortgage.

(g)Negotiate, enter into and administer service contracts and licenses for the operation of the Hotels, including, to the extent appropriate, contracts and licenses for health and safety systems maintenance, electricity, gas, telephone, cleaning, elevator and boiler maintenance, air conditioning maintenance, laundry and dry cleaning, master television service, use of copyrighted materials (such as music and videos), entertainment and other services as Manager deems advisable.

(h)Negotiate, enter into and administer contracts for the use of banquet and meeting facilities and guest rooms by groups and individuals.

(i)Take reasonable action to collect and institute in its own name or in the name of Owner or a Hotel, in each instance as Manager in its reasonable discretion deems appropriate, legal actions or proceedings to collect charges, rent or other income derived from the operation of the Hotels or to oust or dispossess guests, tenants, members or other persons in possession therefrom, or to cancel or terminate any lease, license or concession agreement for the breach thereof or default thereunder by the tenant, licensee or concessionaire.

(j)Make representatives available to consult with and advise Owner or Owner’s designee at Owner’s reasonable request concerning policies and procedures affecting the conduct of the business of the Hotels.

(k)Collect and account for and remit to governmental authorities all applicable excise, sales, occupancy and use taxes or similar governmental charges collected by or at the Hotels directly from guests, members or other patrons, or as part of the sales price of any goods, services or displays, such as gross receipts, admission or similar or equivalent taxes, duties, levies or charges.

(l)Keep Owner advised of events which might reasonably be expected to have a material effect on the financial performance or value of any Hotel.

(m)To the extent in Manager’s control, obtain and maintain all approvals necessary to use and operate the Hotels in accordance with the Brand Standards, Operating Standards and Legal Requirements.

(n)Perform such other tasks with respect to the Hotels as are generally performed by managers of similar hotels consistent with the Operating Standards and the Brand Standards.

2.2Additional Services. Any fees for services not included in the Management Fees for the Hotels shall be consistent with fees established for similar types of hotels managed by Manager or its Affiliates. Any disputes under this Section 2.2 shall be resolved by Arbitration.

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2.3Use of Hotels. Manager shall not use, and shall exercise commercially reasonable efforts to prevent the use of, the Hotels and Owner’s and Manager’s personal property used in connection with the Hotels, if any, for any unlawful purpose. Manager shall not commit, and shall use commercially reasonable efforts to prevent the commission of, any waste at the Hotels. Manager shall not use, and shall use commercially reasonable efforts to prevent the use of, the Hotels in such a manner as will constitute an unlawful nuisance thereon or therein. Manager shall use commercially reasonable efforts to prevent the use of the Hotels in such a manner as might reasonably be expected to impair Owner’s or Purchaser’s title thereto or any portion thereof or might reasonably be expected to give rise for a claim or claims for adverse use or adverse possession by the public, as such, or of implied dedication of the Hotels or any portion thereof.

2.4Right to Inspect. Manager shall permit Owner and its authorized representatives to inspect or show the Hotels during usual business hours upon not less than twenty four (24) hours’ notice, provided that any inspection by Purchaser or its representatives shall not unreasonably interfere with the use and operation of the Hotels and further provided that in the event of an emergency as determined by Purchaser in its reasonable discretion, prior notice shall not be required.

2.5Right of Offset. Manager shall not offset against any amounts owed to Owner; provided, however, Manager may offset amounts which Owner has failed to fund in violation of Section 5.2(c) against the amounts owed to Owner hereunder provided that after giving effect to such offset there shall still be paid to Owner an amount sufficient to pay regularly scheduled payments of interest and principal under any loan or other debt secured by an Authorized Mortgage and attributable to the Pledged Hotels.

2.6Condition of the Hotels. Manager acknowledges receipt and delivery of possession of each Hotel, and Manager accepts each Hotel in its “as is” condition as of the Effective Date, subject to the rights of parties in possession, the existing title, including all covenants, conditions, restrictions, reservations, mineral leases, easements and other matters of record or that are visible or apparent on the Hotels, all applicable Legal Requirements, and such other matters which would be disclosed by an inspection of the Hotels and the record title thereto or by an accurate survey thereof. MANAGER REPRESENTS THAT:  IT HAS INSPECTED THE HOTELS INCLUDING THE FF&E AND ALL OF THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY AND IN COMPLIANCE WITH THE BRAND STANDARDS IN ALL MATERIAL RESPECTS; EXCEPT FOR CAPITAL REPLACEMENT TO BE MADE FROM TIME TO TIME USING FUNDS TO BE DEPOSITED IN THE RESERVE ACCOUNT PURSUANT TO SECTION 5.2(a), MANAGER CURRENTLY DOES NOT ANTICIPATED THE NEED TO MAKE CAPITAL REPLACEMENTS DURING THE FIRST FIVE YEARS OF THE TERM (PROVIDED, HOWEVER, SUCH REPRESENTATION IS NOT A GUARANTY OR WARRANTY THAT NO SUCH CAPITAL REPLACEMENT WILL BE REQUIRED); AND IT IS NOT RELYING ON ANY REPRESENTATION OR WARRANTY OF OWNER, PURCHASER OR ANY OF THEIR AGENTS OR EMPLOYEES WITH RESPECT TO ANY OF THE MATTERS SET FORTH IN THIS SECTION. MANAGER WAIVES ANY CLAIM OR ACTION AGAINST OWNER AND PURCHASER WITH RESPECT TO THE CONDITION OF THE HOTELS.

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PURCHASER AND OWNER MAKE NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE HOTELS OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT.

ARTICLE 3

TERM AND RENEWALS

3.1Term. The term of this Agreement shall be for a period beginning on the Effective Date and continuing for the Initial Term and any extension of the term hereof in accordance with the provision of this Agreement, unless sooner terminated as hereinafter provided.

3.2Renewal Term. The Term may be extended, at Manager’s option, for up to two (2) consecutive periods (each, a “Renewal Term”) of twelve (12) years and six (6) months each on not less than two (2) years’ prior notice to Owner. In the event Manager fails to give notice of its election not to exercise either of its options to extend the Term on or before the date which is the day prior to the date that is two (2) years prior to the then Expiration Date, Manager shall be deemed to have exercised the applicable extension option. The terms and provisions of this Agreement will remain in effect as stated herein during any Renewal Term except that Manager shall have no right to extend the Term beyond the Renewal Terms herein provided.

3.3Owner’s Termination Right at End of Term. If Manager, gives notice of its election not to extend or if Manager shall have no further right to extend the Term, at any time during the last two years of the Term, Owner may terminate this Agreement on not less than thirty (30) days’ prior written notice.

ARTICLE 4

TITLE TO HOTEL

4.1Covenants of Title. During the Term, provided no Manager Default exists, Manager shall have the right peaceably and quietly to operate the Hotels in accordance with the terms of this Agreement, free from interference, disturbance and eviction by Owner or Purchaser or by any other Person or Persons claiming by, through or under Owner or Purchaser, subject only to termination of this Agreement as herein provided. Except as may otherwise be provided herein, Owner, at Owner’s own expense (and not as an Operating Cost), shall prosecute all appropriate actions, judicial or otherwise, required to assure such quiet and peaceable operation by Manager and shall pay and discharge any rental obligations under the Lease. Without Manager’s written consent, which consent shall not be unreasonably withheld, Owner shall not enter into an agreement, covenant or encumbrance affecting title to the Hotels except in connection with Authorized Mortgages and sales or transfers of the Hotels not prohibited hereby.

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4.2Non-Disturbance. Purchaser agrees that in the event the Lease terminates prior to expiration or earlier termination of the Term, so long as (i) there exists no uncured Manager Event of Default and (ii) Owner is not otherwise entitled to terminate this Agreement: (a) Manager shall not be disturbed in its rights under this Agreement by Purchaser; (b) Purchaser shall assume the obligations of Owner under this Agreement; and (c) Manager shall attorn to Purchaser and recognize Purchaser as the “Owner” under this Agreement. Purchaser shall have the right to assign all of its right, title and interest in, to and under this Agreement to a new tenant (a “Substitute Tenant”) to which Purchaser shall lease the Hotels (pursuant to a lease which imposes no greater risks, obligations, duties or liability on Manager than the Lease (assuming the same had not been terminated) and for a term equal to the unexpired term of this Agreement) which Substitute Tenant shall expressly assume all of the Owner’s obligations under this Agreement. Upon such assignment to, and assumption by, a Substitute Tenant, Purchaser shall be relieved of all future obligations arising under this Agreement (other than any expressly imposed on Purchaser pursuant to Sections 4.2 through and including 4.7), Manager shall attorn to the Substitute Tenant and recognize the Substitute Tenant as the “Owner” under this Agreement, and the term “Lease” as used in this Agreement shall be deemed to refer to such lease between Purchaser and the Substitute Tenant.

4.3Financing.

(a)Purchaser shall be entitled to encumber the Hotels or any of them with one or more Authorized Mortgages which is expressly subordinate to this Agreement or in connection with which the following terms and conditions are satisfied:

(i)loan or other debt secured by such Authorized Mortgage shall not be cross-collateralized with other property or hotels which are not managed or franchised by Manager, IHG or their respective Affiliates;

(ii)the principal amount secured by such Authorized Mortgage shall not exceed the sum of seventy five percent (75%) (or, if less than four (4) Hotels secure such principal amount, sixty five percent (65%)) of the sum of the fair market value as of the date of the granting of such Authorized Mortgage of the Pledged Hotels and the other properties securing such principal amount;

(iii)as of the date of the granting of such Authorized Mortgage, the Debt Service Coverage Ratio associated with such loan or debt secured thereby shall not be less than (i)1.4 if fewer than four (4) Hotels secure such loan or other debt or (ii) 1.3if four (4) or more Hotels secure such loan or other debt; and

(iv)the holder of such Authorized Mortgage shall execute and deliver to Manager (Manager agreeing to likewise execute and deliver to such holder) a so-called subordination, non-disturbance and attornment agreement which shall provide that:

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(A)this Agreement and Manager’s rights hereunder are subject and subordinate to the Authorized Mortgage, the lien thereof, the rights of the holder thereof and to any and all advances made thereunder, interest thereon or costs incurred in connection therewith;

(B)so long as this Agreement is in full force and effect and there exists no Manager Event of Default, Manager’s rights under this Agreement shall not be disturbed by reason of such subordination or by reason of foreclosure of such Authorized Mortgage or receipt of deed in lieu of foreclosure;

(C)Manager shall attorn to the holder or the purchaser at any such foreclosure or the grantee of any such deed (each, a “Successor Purchaser”);

(D)in the event of such attornment, the terms of this Agreement binding on Purchaser and Manager shall continue in full force and effect as a direct agreement between such Successor Purchaser and Manager, upon all the terms, conditions and covenants set forth herein, except that the Successor Purchaser shall not be (1) bound by any payment of Owner’s Priority, Owner’s Percentage Priority or the Residual Distribution in advance of when due; (2) bound by any amendment or modification of this Agreement made after the date that Manager first had written notice of such Authorized Mortgage without the consent of the holder thereof; (3) liable in any way to Manager for any act or omission, neglect or default on the part of Purchaser or Owner under this Agreement; (4) obligated to perform any work or improvements to be done by Purchaser or Owner or to make any advances except for those advances to be made pursuant to Section 5.2(c) from and after the date on which such Successor Purchaser acquired the Hotel(s); or (5) subject to any counterclaim or setoff which theretofore accrued to Manager against Purchaser or Owner;

(E)In the event of a casualty or condemnation affecting any Pledged Hotel which does not result in the termination of this Agreement with respect to such Pledged Hotel, the net insurance proceeds or Award shall be applied to the restoration of such Hotel as herein provided; and

(F)Such other terms or are customary for similar agreements.

(b)In the event less than all of the Hotels are to secure loan or other debt secured by an Authorized Mortgage, Owner shall have the right to cause the Pledged Hotels to be managed pursuant to a separate management agreement which agreement shall be for a term equal to the unexpired portion of the Term and otherwise on substantially the same terms of this Agreement except as otherwise provided herein provided that the Pledged Hotels in the aggregate and the remaining Hotels in the aggregate shall have Priority Coverage Ratios for the 12-month period ending on the last day of the month next prior to the date on which such Authorized Mortgage is granted such Priority

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Coverage Ratios are equal to each other or equal to, or greater than, 1.3. In connection with entering into such separate management agreement, the parties shall make appropriate allocations of Owner’s Priority, amounts in the Reserve Account, the Deposit (based on Exhibit C), the Working Capital, and any outstanding advances made by Owner, Manager or their respective Affiliates so that the obligations allocable to the Hotels subject to such Authorized Mortgage shall not be due from the other Hotels and vice versa. The allocation of Owner’s Priority for each Hotel shall be proportional to the NOI of such Hotel for the then most recently ended twelve (12) months relative to the NOI of all the other Hotels for such period. Without the consent of Manager, the holder of any Authorized Mortgage shall have the right to elect to be subject and subordinate to this Agreement, such subordination to be effective upon such terms and conditions as such holder may direct which are not inconsistent with the provisions hereof.

4.4Sale of a Hotel. In the event of a sale or transfer of any Hotel to an Affiliate of Purchaser, this Agreement shall remain in full force and effect without regard to such sale or transfer. The following shall apply each time Purchaser sells or otherwise transfers less than all of the Hotels other than to an Affiliate:

(a)Subject to the terms of Section 4.7 and the execution or delivery of a New Management Agreement as provided below, this Agreement with respect to such Hotel(s) (the “Transferred Hotels”) shall be terminated effective as of the date title is transferred to such Transferred Hotels.

(b)Simultaneously with such termination, Manager and the transferee of the Transferred Hotels or Owner (if the Lease remains in full force and effect with respect to the Transferred Hotels) or any tenant under a new lease with respect to the Transferred Hotels (which new lease shall have a term equal to the then unexpired term of the Lease and shall impose no greater liability, responsibility, or obligation on Manager than the Lease) shall enter into a new management agreement (a “New Management Agreement”) with Manager on substantially the same terms as this Agreement except as otherwise provided herein for a term equal to the unexpired portion of the Term of this Agreement.

(c)Manager, Purchaser and the transferee (or its tenant, acting reasonably, shall allocate amounts in the Reserve Account, the Deposit (based on Exhibit C) and the Working Capital between the Transferred Hotels and the other Hotels. The parties shall also make reasonable allocations with respect to Owner’s Priority, and any outstanding advances made by Owner, Manager or their respective Affiliates. The allocation of Owner’s Priority for each Hotel shall be proportional to the NOI of such Hotel for the then most recently ended twelve (12) months relative to the NOI of all the other Hotels for such period. Amounts which are allocated to the Transferred Hotels shall be transferred to the transferee thereof to be held by Manager or such transferee (or its tenant) pursuant to the New Management Agreement.

(d)Following such sale or transfer, Owner, its Affiliates and the Hotels which are not Transferred Hotels shall have no responsibilities with respect to amounts that are so

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transferred and the transferee, its tenant and their Affiliates and the Transferred Hotels shall have no responsibility with respect to amounts which are not so transferred.

(e)From and after the consummation of such sale or other transfer and compliance with the terms hereof, the term “Hotels” as used herein shall not include the Transferred Hotels.

(f)Owner shall be responsible to cause its Affiliates, any new tenant and the transferee to execute and deliver the documents contemplated by this Section 4.4 to be executed and delivered by them.

(g)The Hotels which are to be Transferred Hotels in the aggregate and the remaining Hotels in the aggregate shall have a Priority Coverage Ratios for the 12-month period ending on the last day of the month next prior to the date of such transfer which are either (i) equal to each other or (ii) equal to, or greater than, 1.3.

(h)Not less than ten (10) days prior to commencing to market any Hotel for sale, Purchaser (unless it is a Successor Purchaser) shall solicit from Manager an offer to purchase such Hotel.

4.5Sale of All the Hotels. If Purchaser sells or otherwise transfers all of the Hotels to a single transferee in a single transaction, (a) the transferee shall assume Purchaser’s obligations hereunder and (b) Purchaser shall be released and relieved from any and all obligation hereunder. In connection with such transfer, Owner may assign this Agreement, to the transferee or its Affiliate, and provided the assignee assumes all of Owner’s obligations hereunder thereafter accruing, Owner shall be released and relieved from all such obligations.

4.6The Lease. The Lease shall not be amended or modified in any way which would materially increase Manager’s obligations hereunder or materially reduce its rights hereunder. In the event of a conflict between the terms hereof and the terms of the Lease, the terms hereof shall govern.

4.7Restricted Sale. Except in connection with a foreclosure of an Authorized Mortgage, neither Purchaser nor Owner shall transfer its interest in any Hotel directly or indirectly, to any Person which: (i) is in control of or controlled by Persons who have been convicted of felonies; (ii) is a Competitor or an Affiliate of a Competitor; or (iii) lacks the financial capabilities to perform Owner’s obligations hereunder.

ARTICLE 5

REQUIRED FUNDS

5.1Working Capital. Manager shall contribute to the Working Capital for the Hotels an amount reasonably sufficient to pay Operating Costs for the first thirty (30) days of operating of the Hotels following the Effective Date (the “Initial Working Capital”) and (b) upon the execution and delivery hereof, pay to Owner the monthly installment of Owner’s Priority for the month in which the Effective Date occurs. Promptly after the

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month in which the Effective Date occurs, the parties shall agree on the amount of the Initial Working Capital which Manager so contributed. After the first thirty (30) days of operating the Hotels, upon written notice from Manager, Owner shall advance any additional funds, over and above the Initial Working Capital, necessary to pay Operating Costs (but not Owner’s Priority) as they come due. Any such request by Manager shall be accompanied by a reasonably detailed explanation of the reasons for the request. All funds so advanced for Working Capital shall be utilized by Manager to pay Operating Costs as they come due. If Owner does not advance such additional Working Capital within two (2) Business Days after notice, Manager, as its exclusive remedy, shall have the right either to (i) advance such additional Working Capital or (ii) terminate this Agreement on ten (10) days’ advance written notice to Owner; provided, however, such notice of termination shall be void ab initio if Owner advances the requested funds necessary to pay Operating Costs prior to the end of the tenth (10th) day after the receipt of such termination notice. If Manager fails to either make such advance or give notice of termination within ten (10) days, after the expiration of such two (2) Business Days, Owner may elect by written notice to Manager to terminate this Agreement, which termination shall be effective ten (10) days after the date such notice is given. Upon the expiration or earlier termination of the Term, provided there is no uncured Manager Default, after the payment of all Operating Costs and all amounts owed to Owner, Manager shall be entitled to retain the Initial Working Capital.

5.2Reserve Account.

(a)Manager shall transfer from the Bank Accounts to the Reserve Account in cash on or before the 25th day of each Fiscal Month, beginning on August 25, 2003 and continuing for each and every month during the Term an aggregate amount equal to the sum of each Hotel’s Reserve Percentage of its Gross Revenues for the prior Fiscal Month. Amounts in the Reserve Account are to pay for Capital Replacements undertaken after the Effective Date required to maintain any and all of the Hotels in accordance with the Operating Standards and the Brand Standards; provided, however, notwithstanding anything in this Agreement to the contrary, no additional cost or expense shall be incurred or paid in connection with any Capital Replacements made during the last two (2) years of the Term to the extent attributable solely to complying with the Brand Standards. The amounts so paid into the Reserve Account shall be recorded on the Hotels’ books of account as “Reserve for FF&E Replacements.”  Except as expressly provided herein, any expenditures for Capital Replacements during any Fiscal Year which have been approved in the yearly Capital Replacements Budget may be made without Owner’s further approval and, to the extent available, may be made by Manager from the Reserve Account. Any amounts remaining in the Reserve Account at the close of each Fiscal Year will be carried forward and retained in the Reserve Account. Any and all portions of the Hotels which are scrapped or removed in connection with the making of any major or non-major repairs, renovations, additions, alterations, improvements, removals or replacements at the Hotels shall be disposed of by Manager and any net proceeds thereof shall be deposited in the Reserve Account and not included in Gross Revenues. In addition, any proceeds from the sale of FF&E no longer necessary to the operation of the Hotels shall be added to the Reserve Account. Manager shall be entitled to use funds in the Reserve Account to make

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Capital Replacements at any and all of the Hotels regardless of the Hotel from which such funds originate.

(b)Manager shall be the only party entitled to withdraw funds from the Reserve Account until a Manager Default shall occur.

(c)If, at any time, the funds in the Reserve Account shall be insufficient for Capital Replacements which are set forth in the Capital Replacement Budget or required to comply with the Operating Standards, Brand Standards, Insurance Requirements or Legal Requirements, Manager shall give Owner written notice thereof, which notice shall set forth, in reasonable detail, the nature of the required action, the estimated cost thereof (including the amount which is in excess of the amount of funds in such Reserve Account) and such other information with respect thereto as Owner may reasonably require. Provided that there is then no uncured Manager Default, Owner shall, within twenty (20) Business Days after such notice, disburse (or cause Purchaser to disburse) such required funds to Manager for deposit into the Reserve Account. In such event Owner’s Priority shall be adjusted as provided for herein in the definition of Owner’s Priority.

(d)If Owner shall fail to disburse (or cause Purchaser to disburse) funds to Manager for deposit into the Reserve Account in violation of Section 5.2(c), which failure continues for five (5) days after the giving of notice from Manager to Owner, in addition to Manager’s other remedies hereunder or under the HPT Guaranty (as defined in the Purchase Agreement) Manager shall be entitled, but not obligated, to deposit in the Reserve Account the amount of funds which Owner so failed to disburse.

(e)Upon the expiration or earlier termination of the Term, Manager shall disburse to Owner, or as Owner shall direct, all amounts remaining in the Reserve Account after payments of all expenses on account of Capital Replacements incurred by Manager during the Term.

5.3Additional Requirements for Reserve. All expenditures from the Reserve Account shall be (as to both the amount of each such expenditure and the timing thereof) both reasonable and necessary given the objective that the Hotels will be maintained and operated to a standard comparable to competitive properties and in accordance with the Operating Standards and the Brand Standards.

5.4Ownership of Replacements. All Capital Replacements made pursuant to this Agreement and all amounts in the Reserve Account, shall be the property of Owner or Purchaser, as applicable, as provided under the Lease.

5.5Manager Reserve Advances. Manager shall have the right to propose certain Capital Replacements not required by the Operating Standards or the Brand Standards which Manager reasonably believes would maximize the profit potential of one or more of the Hotels. If Owner does not agree to provide funds for the same, Manager shall have the right to contribute to the Reserve Account the cost of same and cause such Capital Replacement to be made.

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5.6No Additional Contributions. Except as otherwise expressly provided in this Agreement, Owner shall not, under any circumstances, be required to, or provide funds to, build or rebuild any improvement at the Hotel, or to make any repairs, replacements, alterations, restorations or renewals of any nature or description to the Hotel, whether ordinary or extraordinary, structural or nonstructural, foreseen or unforeseen.

ARTICLE 6

BRAND STANDARDS AND MANAGER’S CONTROL

6.1Brand Standards. Manager shall operate each Hotel as a Staybridge Suites hotel in accordance with the terms of this Agreement, the Brand Standards and the Operating Standards. Manager and its affiliates which own the System Marks and Brand Standards reserve the right to revise and amend the System Marks or Brand Standards from time to time on a non-discriminatory basis; provided, however, at any time while Owner and its Affiliates own or lease at least fifty percent (50%) of the hotels comprising the Brand, no revision or amendment to the Brand Standards or System Marks shall be made without Owner’s prior written approval, which approval shall not be unreasonably withheld, conditioned or delayed and shall be deemed given if no written objection thereto is given by Owner within twenty (20) days after receipt of a request for such approval given by Manager. Owner also agrees that the Hotel will be required to participate in Brand-wide or area programs that are implemented after the date hereof from time to time by Manager or its Affiliates with respect to the Brand. The allocable cost of participation in such programs (to the extent not duplicative of the services for which the Management Fee is being paid, shall be Operating Costs of the Hotel to the extent the same are consistent in all material respects with the amounts for the same included in the applicable Yearly Budget.

6.2Manager’s Control. Subject to the terms of this Agreement, Manager shall have uninterrupted control over the operation of the Hotel. Owner acknowledges that under this Agreement, Owner delegates all authorities and responsibilities for operation of the Hotel to Manager provided, however, Manager shall not be entitled to make any agreement or commitment binding on Owner except as herein expressly provided. Manager shall be solely responsible for determining room rates, food and beverage menu prices, charges to guests for other Hotel services and the terms of guest occupancy and admittance to the Hotels, use of rooms for commercial purposes, policies relating to entertainment, labor policies, publicity and promotion activities and technology services and equipment to be used in the Hotel. Manager shall review with Owner from time to time, and during the annual review of the Yearly Budget, material changes in policies, practices and procedures and their effect on the financial performance of the Hotels.

6.3Arbitration. Any dispute under this Article 6 shall be resolved by Arbitration.

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ARTICLE 7

OPERATION OF THE HOTEL

7.1Permits. Manager, as an Operating Cost, shall obtain and maintain in its name (or Owner’s or Purchaser’s name to the extent the same is required by applicable Legal Requirements)in full force and effect all necessary operating licenses and permits, including liquor, bar, restaurant, sign and hotel licenses, as may be required for the operation of the Hotels in accordance with this Agreement, the Brand Standards and the Operating Standards. Owner and/or Purchaser shall reasonably cooperate with Manager in obtaining any such operating licenses or permits. Any costs or expenses (including, without limitation, reasonable attorneys’ fees) incurred by Owner and/or Purchaser in connection therewith shall constitute Operating Costs. Manager will use reasonable efforts to comply with all Legal Requirements imposed in connection with any such licenses and permits and at all times use commercially reasonable efforts to manage the Hotels in accordance with, and cause the Hotels to comply with, such Legal Requirements, any other Legal Requirements and Insurance Requirements applicable to any Hotel.

7.2Equipment and Supplies. Manager shall procure pursuant to the Yearly Budgets all such Operating Supplies and Operating Equipment as Manager deems necessary for the normal and ordinary course of operation of the Hotel in accordance with the Brand Standards and Operating Standards.

7.3Personnel.

(a)All personnel employed at the Hotels will be employees of Manager. Manager will hire, supervise, direct, discharge and determine the compensation, other benefits and terms of employment of all personnel working in the Hotels. Manager, in the exercise of reasonable discretion and business judgment, will be the sole judge of the fitness and qualifications of such personnel and is vested with absolute discretion in the hiring, supervising, directing, discharging and determining the compensation, other benefits and terms of employment of such personnel. In such discretion, Manager may elect to staff certain functions at offsite or regional locations, or to provide employee benefits on a Brand-wide or other multi-location basis and shall equitably allocate the employee costs among the hotels participating in such staffing or benefits. Owner shall not interfere with the performance of employment duties of, or give orders or instructions to, any personnel employed at the Hotel. Except as otherwise provided herein, Operating Costs will include all expenses, costs or charges which are allocable to the Term and are related to or incidental to any on-site personnel employed in the operation of the Hotels (including, without limitation, salaries, wages, other compensation, benefit contributions and premiums, net of amounts paid by Hotel employees; stop-loss insurance premiums; group health plan benefit payments in excess of contribution and premium amounts paid by Hotel employees; pay for vacation, holidays, sick leave and other leaves of absence; workers’ compensation premiums; workers compensation benefit payments paid by Manager; reasonable and customary administrative fees and taxes; and severance benefits applicable under Manager’s then current human resources policies).

(b)Manager shall comply with all Legal Requirements pertaining to labor relations and the personnel employed by it pursuant to this Agreement. Manager shall not enter into any

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written employment agreements with any person which purport to bind the Owner without obtaining Owner’s consent, which consent may be withheld in Owner’s sole and absolute discretion. If either Manager or Owner shall be required, pursuant to any such Legal Requirement, to recognize a labor union or to enter into collective bargaining with a labor union, the party so required shall promptly notify the other. The terms of this Section 7.3(b) shall survive the expiration or earlier termination of this Agreement.

(c)No employee of the Hotels shall reside at the Hotels without the prior written approval of Owner. No person shall be given gratuitous accommodations or services without prior approval of Owner except in accordance with usual practices of the Brand and the hotel and travel industry.

(d)To the extent consistent with the applicable Yearly Budget, Operating Cost may include up to $5,000 per Hotel, per Fiscal Year for travel related expense of Manager’s senior operational personnel in connection with their visits to the Hotel. Said $5,000 shall be adjusted every January 1 starting in 2005 to reflect the percentage change in the Consumer Price Index since the prior January 1.

7.4Sales, Marketing and Advertising. Manager shall and/or shall cause its Affiliates to:

(a)advertise and promote the business of the Hotels;

(b)institute and supervise a sales and marketing program for the Hotels;

(c)include the Hotels in Manager’s and its Affiliates’ Brand related local, regional and worldwide promotional and advertising programs;

(d)represent the Hotels through Manager’s and its Affiliates’ worldwide sales offices;

(e)include the Hotels in the Hotels loyalty program, presently called “Priority Club”, including, without limitation, inclusion of the Hotels in promotional materials distributed to participants of such program;

(f)coordinate the Hotels’ participation in travel programs marketed by airlines, travel agents and government tourist departments when Manager determines such participation to be advisable; and

(g)cause the Hotels to participate in sales and promotional campaigns and activities involving complimentary rooms, food and beverages to bona fide travel agents, tourist officials and airline representatives where Manager has determined that such participation is in furtherance of the Hotels’ business and is customary in the travel industry or in the practices and policies of Manager.

7.5Reservation and Communication Services. The Hotels shall be included as participating hotels on the Reservation System operated by Manager, its Affiliates or agent(s) for the benefit of Staybridge Suites hotels from and after the Effective Date. Manager will provide the following services to the Hotels through the Reservation System:

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(a)acceptance of reservations for the Hotels through the Reservation System from individual customers and groups who contact Manager (or its Affiliates or agents) directly or through a regional reservation or sale office of Manager or its Affiliates or agents;

(b)acceptance of reservations for the Hotels through other hotels in the Brand;

(c)acceptance of reservations for the Hotels through the reservation systems of other providers in the travel industry, including, without limitation, global distribution systems and general sales agencies with which Manager (or its Affiliates) may have agreements from time to time, whereby the reservation systems of such parties are available for communication of reservations to hotels in the Brand;

(d)acceptance of reservations for the Hotel received through alternative communications channels such as the internet; and

(e)access to the Hotels of the communications network used by Manager (or its Affiliates) for communication between it and hotels in the Brand.

7.6Maintenance and Repairs. Subject to the terms hereof, Manager shall promptly make or cause to be made all repairs, replacements, corrections, maintenance, alterations, improvements, renovations, installations, replacements, renewals and additions (collectively, “Repairs”) of every kind and nature, whether interior or exterior, structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen or arising by reason of a condition existing prior to the commencement of the Term (concealed or otherwise) necessary or appropriate to maintain the Hotels including all private roadways, sidewalks and curbs located thereon for which Owner, Purchaser or a Hotel has responsibility in good order and repair, reasonable wear and tear excepted (whether or not the need for such Repairs occurs as a result of Owner’s or Manager’s use, any prior use, the elements or the age of the Hotels, or any portion thereof), and in conformity with Legal Requirements, Brand Standards and the Operating Standards. All Repairs shall be made in a good, workmanlike manner, consistent with Manager’s and industry standards for like hotels in like locales, in accordance with all applicable Legal Requirements. To the extent such Repairs cannot be performed by Manager’s on-site staff, Manager shall entitled to cause such repairs to be performed by third parties or, subject to Owner’s prior approval, Affiliates of Manager acting under separate Technical Services Agreements pursuant to Section 11.1.

7.7Material Repairs.

(a)Except as set forth in Section 7.7(b), prior to making any Material Repair, Manager shall submit, to Owner in writing, a proposal setting forth, in reasonable detail, the proposed Material Repair and shall provide to Owner such plans and specifications, and such permits, licenses, contracts and such other information concerning the same as Owner may reasonably request. Owner shall have twenty (20) Business Days to approve or disapprove all materials submitted to Owner, in connection with any such proposal; provided, however, (i) Owner may not withhold its approval of a Material Repair with

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respect to such items as are (A) required in order for the Hotels to comply with Brand Standards (except during the last two (2) years of the Term as set forth in Section 5.2(a)) or Operating Standards; or (B) required by reason of or under any Insurance Requirement or Legal Requirement, or otherwise required for the continued safe and orderly operation of each Hotel and (ii) Owner’s approval shall not be required with respect to the cost of any proposed Material Repair if the same is set forth as a separate line item in the then applicable Capital Replacements Budget. If Owner fails to disapprove of such Material Repair within such twenty (20) Business Days, Owner shall be deemed to have approved same.

(b)In the event that a condition should exist in or about the Hotel of an emergency nature or in violation of applicable Legal Requirements or Insurance Requirements, including structural conditions, which requires immediate repair necessary to prevent imminent danger or damage to persons or property, Manager is hereby authorized to take all steps and to make all expenditures necessary to repair and correct any such condition, regardless of whether provisions have been made in the applicable Yearly Budget for any such expenditures or if sufficient funds exist in the Reserve Accounts. Upon the occurrence of such an event or condition, Manager will communicate to Owner all available information regarding such event or condition as soon as reasonably possible and will take reasonable steps to obtain Owner’s approval before incurring such expenses. Expenditures under this Section 7.7(b) shall be paid from the Reserve Account or otherwise paid in accordance with Section 5.2(c) to the extent such expenditure is properly considered a Capital Replacement.

(c)No Capital Replacement shall be made which would tie-in or connect a Hotel with any other improvements on property adjacent to such Hotel (and not part of its Site) including, without limitation, tie-ins of buildings or other structures or utilities (other than connections to public or private utilities) without the prior written approval of Owner, which approval may be granted or withheld in Owner’ sole and absolute discretion.

7.8Liens; Credit. Manager shall use commercially reasonable efforts to prevent any liens from being filed against any Hotel which arise from any Repairs in or to such Hotels. Manager shall use commercially reasonable efforts to cause the release of any such liens from the Hotels. If any such lien arises as a result of or in connection with a Manager Default, then Manager shall bear the cost of obtaining the lien release (exclusive of the cost of the Repair to which it pertains, unless Manager is otherwise responsible therefor) and the same shall not constitute an Operating Cost. In no event shall any party borrow money in the name of, or pledge the credit of, any other party. Manager shall not allow any lien to exist with respect to its interest in this Agreement. Manager shall not finance the cost of any Repair by the granting of a lien on, or security interest in, any Hotel or Manager’s interest therein or hereunder.

7.9Real Estate and Personal Property Taxes. Manager shall pay as Operating Costs, prior to delinquency, all taxes and assessments which may become a lien on, or are assessed against, any Hotel or any component thereof and which may be due and payable for the Term, unless payment thereof is being contested by Manager, as hereinafter provided, enforcement is stayed and the amount so contested is escrowed

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or guaranteed in a form satisfactory to Owner. Owner shall, promptly after receipt thereof by Owner, give Manager copies of all notices as to all such taxes and assessments.

7.10Contest. Manager shall have the right in Manager’s or Owner’s name to contest or protest any tax or assessment or proposed assessment which may become a lien on, or be assessed against, any Hotel or any component thereof due and for the Term or any Legal Requirement payable by appropriate legal proceedings, conducted in good faith and with due diligence provided that (a) such contest shall not cause Purchaser or Owner to be in default under any Authorized Mortgage, (b) no part of a Hotel nor any Gross Revenues therefrom shall be in any immediate danger of sale, forfeiture, attachment or loss, and (c) Owner and Purchaser are not exposed to any risk for criminal or civil liability.

ARTICLE 8

FISCAL MATTERS

8.1Accounting Matters.

(a)Manager shall maintain books and records reflecting the results of Hotel operations on an accrual basis in accordance with the Uniform System of Accounts and the Accounting Principles. In consideration thereof, Manager shall be paid the accounting fee as provided in Article 8. Owner and Manager and their respective independent accounting firms and representatives will have the right to examine such books and records of the Hotel at any reasonable time and to make and retain copies thereof. Manager shall retain, for at least three (3) years after the expiration of each Fiscal Year, reasonably adequate records showing Gross Revenues and applications thereof for the Hotels for such Fiscal Year (which obligation shall survive termination hereof).

(b)On or before the twenty-fifth (25th) day after the end of each Fiscal Month, Manager shall furnish Owner with a detailed operating statements setting forth the results of operations at the Hotels with respect to such month showing for each Hotel, Gross Revenues, Rooms Revenues, revenue per available room, occupancy percentage and average daily rate, Operating Costs, Operating Profit, the applications and distributions thereof and its Owner’s Percentage Priority together with an Officer’s Certificate. Such statements may be provided electronically to Owner.

(c)Not less than ten (10) days prior to the date on which Owner or any of its Affiliates are required to file audited financial statements with the United States Securities and Exchange Commission (but in all events on or before February 15 of each year), Manager shall deliver to Owner and Purchaser an Officer’s Certificate (the “8.1(c) Statement”) setting forth the totals for each Hotel and for all of the Hotels of Gross Revenues and Operating Costs, the calculation of Owner’s Percentage Priority and the Residual Distribution and deposits to, and expenditures from, the Reserve Account together with an Agreed Upon Procedures Letter with respect thereto. The cost of obtaining such letter shall be an Operating Cost.

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(d)If any amounts due to Owner as shown in an Officer’s Certificate or audit provided pursuant to Sections 8.1(f) or 17.4 exceed the amounts previously paid with respect thereto to Owner, Manager shall pay such excess to Owner at such time as the Officer’s Certificate or audit is delivered, together with interest at the Interest Rate from the date due. (Any such interest which accrues after the day that is ten (10) Business Days after the date on which the 8.1(c) Statement is delivered and any such interest which results from Manager’s willful understatement of amounts due to Owner shall not be Operating Costs, but shall be paid by Manager.)  If Owner’s Percentage Priority due as shown in an Officer’s Certificate or audit is less than the amount previously paid with respect thereto to Owner, Owner shall be entitled to retain the same but shall credit such overpayment against the next installment of Owner’s Percentage Priority. If any Management Fee due to Manager as shown on an Officer’s Certificate or audit is less than the amount previously paid to Manager on account thereof, Manager shall, within ten (10) Business Days after the date on which such Officer’s Certificate or audit is delivered, deposit the overpayment in the Bank Accounts. If the Residual Distribution due as shown on the Officer’s Certificate or audit is less than the amount previously paid to Owner with respect thereto, Owner shall promptly deposit (or deliver to Manager who will in turn deposit) the overpayment in the Bank Accounts. In no event shall (i) any amount previously deposited in the Reserve Account be withdrawn therefrom pursuant to this Article 8 or (ii) distributions of Owner’s Priority be subject to adjustment.

(e)In addition, Manager shall provide Owner with information relating to the Hotels, Manager and its Affiliates that (i) may be required in order for Owner or its Affiliates to prepare financial statements in accordance with Accounting Principles or to comply with any Legal Requirement including, without limitation, any applicable securities laws and regulations and the United States Securities and Exchange Commission’s interpretation thereof, (ii) may be required for Owner or any of its Affiliates to prepare federal, state or local tax returns, or (iii) is of the type that Manager customarily prepares for other hotel owners or itself.

(f)At Owner’s election and at Owner’s cost except as otherwise provided herein, a certified audit of the Hotels’ operations may be performed annually, and after the Expiration Date, by a nationally recognized, independent certified public accounting firm appointed by Owner. In the event that Owner elects to have such an audit performed, Owner must give notice of its election within twelve (12) months after its receipt of the applicable 8.1(c) Statement. Any dispute concerning the correctness of an audit shall be settled by Arbitration. Manager shall pay the cost of any audit revealing an understatement of Owner’s Percentage Priority and the Residual Distribution by more than three percent (3%) in the aggregate, and such cost shall not be an Operating Cost. In the event that either no notice of audit is given within said twelve (12) months, or no audit is in fact commenced within eighteen (18) months after receipt of the 8.1(c) Statement, such operating statement will constitute the final statement for that Fiscal Year, deemed to have been approved by Owner.

(g)The terms of this Section 8.1 shall survive the expiration or earlier termination of the Term.

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8.2Yearly Budgets.

(a)Not less than sixty (60) days prior to the first day of each Fiscal Year after the 2003 Fiscal Year, Manager shall submit to Owner for Owner’s approval a proposed Yearly Budget for each Hotel including a proposed Capital Replacements Budget for each Hotel for the ensuing full or partial Fiscal Year, as the case may be. Owner’s approval of the Yearly Budgets and the Capital Replacements Budgets shall not be unreasonably withheld or delayed. If Owner fails to disapprove of a proposed Yearly Budget within thirty (30) days after the submission thereof to Owner for its approval, the same shall be deemed approved. Manager will, from time to time not less often than quarterly, issue periodic forecasts of operating performance to Owner reflecting any significant unanticipated changes, variables or events or describing significant additional unanticipated items of income or expense. Manager will provide Owner with the material data and information utilized in preparing the Yearly Budgets and the Capital Replacements Budgets or any revisions thereof. Manager will not be deemed to have made any guaranty, warranty or representation whatsoever in connection with the Yearly Budgets and the Capital Replacements Budgets, except that the proposed Yearly Budgets, including the Capital Replacements Budgets, reflect Manager’s best professional estimates of the matters they describe. Manager shall use its reasonable efforts, subject to the Operating Standards, to operate and manage the Hotels in accordance with their Yearly Budgets. The Yearly Budgets for the Hotels for 2003 Fiscal Year shall be those most recently delivered by Manager to Owner on or before the Effective Date.

(b)In the event Owner disapproves or raises any objections to the proposed Yearly Budget, or any portion thereof, or any revisions thereto, Owner and Manager shall cooperate with each other in good faith to resolve the disputed or objectionable items. If Owner disapproves of a proposed Yearly Budget, Owner will disapprove on a specific line-by-line basis to the extent reasonably practical. Any dispute with respect to a proposed Yearly Budget which is not resolved by the parties within thirty (30) days after the submission thereof to Owner shall be resolved by Arbitration.

(c)In the event Owner and Manager are not able to resolve the disputed or objectionable matters raised by Owner in regard to a Yearly Budget prior to the commencement of the applicable Fiscal Year, either voluntarily or by means of Arbitration, Manager is authorized to operate the Hotel in accordance with the proposed Yearly Budget; provided, however, that as for disputed budget items, Manager may not expend more than the previous year’s budgeted amount for such item (if any), increased by a percentage equal to the increase in the Consumer Price Index during the last year unless such expenditure is of the type contemplated under Section 7.7(b) or is for an expense (such as real estate taxes, insurance premiums or utilities) which are beyond the Managers reasonable control. For purposes of this section, “increase in the Consumer Price Index during the last year” shall mean the percentage increase in the Consumer Price Index for the twelve (12) month period ending immediately prior to the date of submission of the disputed proposed Yearly Budget.

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8.3Bank Accounts.

(a)The revenues of the Hotel shall be deposited into the one or more Bank Accounts. The Bank Accounts will be separate and distinct from any other accounts, reserves or deposits required by this Agreement, and Manager’s designees who are included in the coverage of any required fidelity or similar insurance will be the only parties authorized to draw upon any Bank Account; provided, however, such designees shall only be authorized to draw upon a Bank Account for purposes authorized by the terms of this Agreement.

(b)So long as this Agreement is in full force and effect and there is no uncured Manager Default, Manager shall have exclusive control of the Bank Accounts. Nothing contained herein is to be construed as preventing Manager from maintaining separate payroll accounts or petty cash funds and making payments therefrom as the same may be customary in the hotel business or the Brand Standards.

8.4Consolidated Financials. Each Ultimate Parent of Manager and each Guarantor shall furnish to Owner within ten (10) days after the filing by such Ultimate Parent or any Guarantor of any material filing with respect to the securities of such Ultimate Parent or such Guarantor or any financial statement with any governmental agency, quasi-governmental agency or stock exchange, a copy of the same; provided, however, if a Guarantor or Ultimate Parent of Manager is not required to file interim and annual financial statements with the Securities and Exchange Commission or its equivalent in the United Kingdom such Guarantor or Ultimate Parent shall furnish the following statements to Owner:

(a)Within forty-five (45) days after each interim period for which such Ultimate Parent or Guarantor prepares Consolidated Financials, the Consolidated Financials of such Ultimate Parent or Guarantor for such period accompanied by an Officer’s Certificate; and

(b)within ninety (90) days after each fiscal year of such Ultimate Parent or Guarantor, the Consolidated Financials of such Ultimate Parent or such Guarantor for such fiscal year audited by a firm of independent certified public accountants reasonably satisfactory to Owner accompanied by an Officer’s Certificate.

ARTICLE 9

FEES TO MANAGER

9.1Management Fees. As consideration for the management and operation of the Hotel by Manager, Manager shall earn the following fees, which fees shall be payable as provided in Section 10.1.

(a)The Base Management Fee shall be paid in monthly installments in arrears based on the Gross Revenues of the Hotels for the prior Fiscal Month. The Base Management Fee for any period less than a full twelve (12) month Fiscal Year shall be paid on the basis of Gross Revenues for that period.

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(b)The Incentive Management Fee shall be paid in monthly installments in arrears. The Incentive Management Fee for any period less than a full twelve (12) month Fiscal Year shall be paid on the basis of Gross Revenues for that period.

9.2Services Fees. Manager shall pay as Operating Costs, usual and customary system fees and assessments on an area-wide basis for the systems of hotels comprising the Brand which currently include a reservation and marketing fee of two and one-half percent (2.5%) of Rooms Revenue, an accounting fee of Fifteen Dollars ($15) per guest room per month and a Priority Club Fee of five percent (5%) of all charges at a Hotel to Priority Club members. Each of the foregoing Services Fees shall be adjusted from time to time to reflect the Hotels’ equitable portion of the Manager’s and its Affiliates’ actual out-of-pocket costs for providing the services to which such fees pertain. Not less frequently than annually, Manager shall provide to Owner financial statements with respect to all fees comparable to the Services Fees collected by Manager and its Affiliates and the applications thereof; provided, however, Manager shall not be obligated to provide such statements with respect to the accounting fee until such time as it has in place the means of producing such statements. Manager covenants, warrants and represents that each hotel in the Brand pays, and shall at all times pay, the same fees for such services and all such fees collected by Manager are, and will be, applied to the cost of providing such services to all hotels in the Brand without profit to Manager or its Affiliates except to the extent that such profit for any year shall be applied to the cost of providing such services in the subsequent year; provided, however, Manager and its Affiliates shall not retain any such profits for an unreasonable period of time. Any disputes under this Section 9.2 shall be resolved by Arbitration.

ARTICLE 10

DISBURSEMENTS

10.1Disbursement of Funds. As and when received by Manager or the Hotels, all Gross Revenues from all of the Hotels shall be deposited into the Bank Accounts and applied in the following order of priority to the extent available:

(a)First, to pay all Operating Costs;

(b)Second, to fund the Reserve Account as required by Section 5.2 for the previous Fiscal Month;

(c)Third, to Owner, all accrued but unpaid Owner’s Priority;

(d)Fourth, to (i) reimburse Manager for any amounts advanced by Manager pursuant to Section 5.2(d) together with interest on the outstanding amounts thereof at the Interest Rate (determined as of the date of the applicable advance) (ii) to pay for Capital Replacements which Owner failed to timely fund pursuant to Section 5.2(c).

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(e)Fifth, to fund the Reserve Account to the extent that the aggregate amounts previously funded for prior periods is less than the amount required to be funded for such periods pursuant to the terms of Section 5.2;

(f)Sixth, (commencing in 2005) to Owner, all accrued but unpaid Owner’s Percentage Priority;

(g)Seventh, to Manager, interest at the Interest Rate (determined as of the date of the applicable advance) on any outstanding amounts advanced by Manager pursuant to Section 15.2(c).

(h)Eighth, to Manager, any accrued but unpaid Base Management Fee for the previous Fiscal Month but no other period;

(i)Ninth, to reimburse Owner for any advances made by Owner to Working Capital;

(j)Tenth, to reimburse Manager for any advances made by Manager to Working Capital in excess of the Initial Working Capital;

(k)Eleventh, to replenish any portion of the Deposit that shall have been applied to the Secured Obligations;

(l)Twelfth, to reimburse the Guarantor for payments made by it on account of the Guaranteed Obligations under the Guaranty provided, however, if the Guarantor shall have Provided Collateral under the Guaranty, then the amount to be reimbursed to the Guarantor under this Section 10.1(l) shall be disbursed to Owner, to be held by Owner as collateral for the Guarantor’s obligations under the Guaranty until the Outstanding Balance (determined as though the disbursement made under this Section 10.1(l) were made to the Guarantor) under the Guaranty does not exceed the sum of (i) the then remaining balance drawable under the Satisfactory Letter of Credit posted under the Guaranty or the balance of the cash deposited by the Guarantor thereunder, plus (ii) proceeds of any such Satisfactory Letter of Credit or cash deposited thereunder, in either case, applied to the Guaranteed Obligations thereunder;

(m)Thirteenth, to reimburse Manager for (i) advances made by Manager pursuant to Section 15.2(c) to the extent then due and payable and (ii) other contributions made by it to the Reserve Account other than pursuant to Section 5.2(d);

(n)Fourteenth, to pay Manager accrued but unpaid Base Management Fees for prior Fiscal Months; and

(o)Fifteenth, to Manager, the Incentive Management Fee.

10.2Residual Distribution. Simultaneously with the making of each payment of the Incentive Management Fee, the then remaining Gross Revenues will be disbursed to Owner. Except as herein provided, Manager shall have no responsibility to incur Operating Costs or undertake any Capital Replacement except to the extent Manager is

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reasonably assured that funds to pay such Operating Costs and for such Capital Replacements will be timely available.

10.3         Owner’s Priority. Owner’s Priority shall be due and payable in advance in equal monthly installments on the first day of each Fiscal Month, pro-rated for any partial month, regardless of any inadequacy of Gross Revenues or Operating Profits. If any installment of Owner’s Priority is not paid when due, the same shall accrue interest at the Interest Rate. (Such interest shall be payable on demand, shall not be an Operating Cost, and shall be paid by Manager.)  Appropriate adjustments shall be made to reflect any change in Owner’s Priority on account of advances made by Owner or Purchaser on the first Business Day of the month next after the date as of which such change occurs. As installments of Owner’s Priority are to be paid in advance, Manager may advance amounts due on account of a monthly installment of Owner’s Priority for a Fiscal Month and reimburse itself from Operating Profits for such Fiscal Month amounts so advanced; provided, however, if Operating Profits for such Fiscal Month in excess of the amount to be contributed to the Reserve Account pursuant to Section 5.2 are insufficient to make such reimbursements, the amount of such insufficiency shall be deemed an advance to Working Capital, and Manager shall be entitled to the reimbursement thereof only pursuant to Section 10.1(j); provided, however, by notice given to Owner within thirty (30) days after the end of Fiscal Month, Manager may elect to deem the amount of such insufficiency an advance under the Guaranty (and not an advance to Working Capital). If Manager shall so make such election, the amount of such insufficiency shall be reimbursed to the Guarantor as provided in Section 10.1(l). If Owner fails to receive any installment of Owner’s Priority as and when due, Owner may terminate this Agreement on not less than thirty (30) days’ notice; provided, however, such notice shall be void ab initio if such installment together with any interest accrued thereon is paid to Owner prior to the thirtieth (30th) day after such notice is given.

10.4Owner’s Percentage Priority. Owner’s Percentage Priority shall be calculated on a Hotel-by-Hotel basis, and shall accrue and be payable in monthly installments to the extent that Gross Revenues year-to-date at any Hotel exceed Gross Revenues for such Hotel for the corresponding period in its Base Year. The installment of Owner’s Percentage Priority for each Fiscal Month shall be due and payable on the twenty fifth (25th) day of the following month.

10.5No Interest. Except as expressly provided herein, no interest shall accrue or be payable to either party hereunder on account of any amount owed to such party hereunder.

10.6Amounts Outstanding at End of Term. Unless this Agreement is wrongfully terminated by Owner upon the expiration or earlier termination of this Agreement, Manager shall have no claim against Owner, Purchaser or the Hotels for amounts owed to it under this Agreement which have not been paid by reason of the inadequacy of Gross Revenues or Operating Profits.

10.7Survival. The terms of this Article 10 shall survive the expiration or earlier termination of the Term.

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ARTICLE 11

CERTAIN OTHER SERVICES

11.1Optional Services. Owner acknowledges that Manager and its Affiliates sometimes provide separate, optional services which may relate to the Hotels in addition to those which are encompassed by this Agreement. Owner agrees to consider in good faith any proposals presented to it by Manager or any of Manager’s Affiliates for such additional services relative to the Hotels; it being understood, however that this Section shall in no event be construed to require Owner to accept any such proposals.

11.2Purchasing. In making purchasing decisions with respect to products and service used in the operation of the Hotels, Manager will exercise reasonable business judgment in accordance with the Operating Standards. Manager shall be entitled to contract with its Affiliates, others in whom Manager or its Affiliates has an ownership interest and others with whom Manager or its Affiliates have contractual relationships to provide goods and/or services to the Hotels’ provided that the prices and/or terms for such goods and/or services are competitive and no worse than the prices and/or terms that such provider charges unrelated third-parties. In determining whether such prices and/or terms are so competitive, they will be compared to the prices and/or terms which are available from comparably qualified providers for goods and/or services of similar quality grouped in reasonable categories, rather than being compared item by item. Subject to the foregoing proviso, the prices charged for such goods or services may include overhead and the allowance of a reasonable return to the provider. Subject to the foregoing proviso, Owner acknowledges and agrees that the providers of such goods and/or services may retain for their own benefit any credits, rebates or commissions received with respect to such purchases. Notwithstanding anything contained herein to the contrary, Manager will act in a manner that enables Owner and the Hotels to gain not less than the same benefits with respect to purchasing as are made available to other hotels of the same category as the Hotels which other hotels are owned or operated by Manager or its Affiliates. Disputes under this Section 11.2 shall be resolved by Arbitration.

ARTICLE 12

SIGNS AND SERVICE MARKS

12.1Signs. To the extent not in place on the Effective Date, Manager agrees to erect and install, in accordance with all applicable Legal Requirements, all necessary signs under the Brand Standards.

12.2System Marks. It is understood and agreed by Owner that the name Staybridge Suites and all System Marks are the exclusive property of Manager or its Affiliates. Owner agrees and acknowledges the exclusive right of ownership of Manager and its Affiliates to the System Marks and the Reservation System. Except for any rights

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expressly granted to Owner in this Agreement, Owner hereby disclaims any right or interest therein, regardless of the legal protection afforded thereto. Except for any rights expressly granted to Owner in this Agreement, in the event of termination or cancellation of this Agreement, whether as a result of a default by Manager or otherwise, Owner shall not hold itself out as, or operate the Hotels as, a Staybridge Suites hotels, and will immediately cease using the name Staybridge Suites, and all other System Marks in connection with the name or operation of the Hotel as of the Expiration Date. Promptly after the Expiration Date (or such later date on which Manager shall cease to operate the Hotels) and the expiration of any right granted to Owner to use the System Marks, subject to the terms of Section 17.4, Owner shall remove all signs, furnishings, printed material, emblems, slogans or other distinguishing characteristics which are now or hereafter may be connected or identified with the Brand or Reservation System. Owner shall not use any System Marks or any part, combination or variation thereof in the name of any partnership, corporation or other business entity, nor allow the use thereof by others.

12.3System Mark Litigation.

(a)Manager, IHG and each other Guarantor shall hold Owner and its Affiliates harmless from and indemnify and defend Owner and its Affiliates against any and all costs and expenses incurred by Owner or its Affiliates (including, without limitation, attorneys’ fees reasonably incurred), arising out of the use of System Marks at or in connection with the operation of the Hotels by Owner or its designees pursuant to the terms of this Agreement or by Manager or its Affiliates.

In the event a Hotel, Owner or Manager is the subject of any litigation or action brought by any party seeking to claim rights in or to restrain the use of any System Mark used by Manager in connection with the Hotel, then, provided Owner is a party to such litigation or action and further provided that Manager shall have provided to Owner either a guaranty in form and substance reasonably satisfactory to Owner with respect to Manager’s obligations under Section 12.3(a) or collateral to secure Manager’s obligations under Section 12.3(a) reasonably satisfactory to Owner, the conduct of any suit whether brought by Manager or instituted against Owner and/or Manager shall be under the absolute control of counsel nominated and retained by Manager notwithstanding that Manager may not be a party to such suit.

(b)The Owner shall not bring suit against any user of any System Mark alleging or asserting any claim based on Owner’s right, title or interest as of the Effective Date in any System Mark.

(c)The terms of this Section 12.3 shall survive the expiration or earlier termination of this Agreement.

ARTICLE 13

INSURANCE

13.1Insurance Coverage. Unless Owner elects to procure and maintain the insurance required hereunder, as an Operating Cost, which election may be made from time to

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time and withdrawn from time to time on not less than thirty (30) days’ notice, to the extent commercially available (regardless of whether it is available on reasonable terms) Manager shall procure and maintain as an Operating Cost, at all times during the Term or while it is in possession of any of the Hotels, reasonable and adequate amounts of casualty, liability and other usual and customary types of insurance for the Hotels and their operations. Without limiting the generality of the foregoing, Manager shall obtain and maintain, with insurance companies of recognized responsibility a minimum of the following insurance to the extent commercially available (regardless of whether it is available on reasonable terms):

(a)“Special Form” property insurance, including insurance against loss or damage by fire, vandalism and malicious mischief, terrorism (if available on commercially reasonable terms), earthquake, explosion of steam boilers, pressure vessels or other similar apparatus, now or hereafter installed in the Hotels, with equivalent coverage as that provided by the usual extended coverage endorsements, in an amount equal to one hundred percent (100%) of the then full replacement cost of the property requiring replacement (excluding foundations) from time to time, including an increased cost of construction endorsement;

(b)Business interruption and blanket earnings plus extra expense under a rental value insurance policy or endorsement covering risk of loss during the lesser of the first twelve (12) months of reconstruction or the actual reconstruction period necessitated by the occurrence of any of the hazards described in subparagraph (a) above, in such amounts as may be customary for comparable properties managed or leased by Manager or its Affiliates in the surrounding area and in an amount sufficient to prevent Owner or Purchaser from becoming a co-insurer;

(c)Commercial general liability insurance, including bodily injury and property damage (on an occurrence basis and on a 1993 ISO CGL form or on a form customarily maintained by similarly situated hotels, including, without limitation, broad form contractual liability, independent contractor’s hazard and completed operations coverage, aggregate limit as applicable) in an amount not less than Two Million Dollars ($2,000,000) per occurrence and umbrella coverage of all such claims in an amount not less than Fifty Million Dollars ($50,000,000) per occurrence;

(d)Flood (if a Hotel is located in whole or in part within an area identified as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968, as amended, or the Flood Disaster Protection Act of 1973, as amended (or any successor acts thereto)) and insurance against such other hazards and in such amounts as may be available under the National Flood Insurance Program and customary for comparable properties in the area;

(e)Worker’s compensation insurance coverage for all persons employed by Manager at the Hotels with statutory limits and otherwise with limits of and provisions in accordance with the requirements of applicable local, state and federal law, and employer’s liability insurance as is customarily carried by similar employers which coverage shall be written by an insurance company of recognized responsibility, as a qualified self-insurer subject

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to applicable state requirements and approvals, or specific to the State of Texas, as a nonsubscriber;

(f)Employment practices liability insurance with limits of Twenty Five Million Dollars ($25,000,000); and

(g)Such additional insurance as may be required, from time to time by (i) any Legal Requirement, (ii) any holder of an Authorized Mortgage or (iii) which is otherwise reasonably required.

13.2Insurance Policies.

(a)All insurance provided for under this Article 13 must be effected by policies issued by insurance companies of good reputation and of sound financial responsibility and will be subject to Owner’s reasonable approval.

(b)All insurance policies (other than workers’ compensation policies) shall be issued in the name of Purchaser with Manager and Owner and any holder of an Authorized Mortgage being named as additional insureds; provided, however, subject to Owner’s obligations under Article 15, Manager shall not be named as an additional insured on, and shall not have any interest in the proceeds of, any property insurance. Purchaser or the holder of an Authorized Mortgage shall be named loss payee(s) on any property insurance.

(c)The insurance herein required may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Owner or Manager, provided that such blanket policies fulfill the requirements contained herein.

(d)In the event Owner or Manager believes that the then full replacement cost of a Hotel has increased or decreased at any time during the Term, such party, at its own cost, shall have the right to have such full replacement cost redetermined by an independent accredited appraiser approved by the other, which approval shall not be unreasonably withheld or delayed. The party desiring to have the full replacement cost so redetermined shall forthwith, on receipt of such determination by such appraiser, give written notice thereof to the other parties. The determination of such appraiser shall be final and binding on the parties hereto until any subsequent determination under this Section 13.2(d), and the party obligation to maintain insurance hereunder shall forthwith conform the amount of the insurance carried to the amount so determined by the appraiser. Such replacement value determination will not be necessary so long as a Hotel is insured through a blanket replacement value policy.

(e)All insurance policies and endorsements required pursuant to this Article 13 shall be fully paid for, nonassessable and, except for umbrella, worker’s compensation, flood and earthquake coverage, shall be issued by insurance carriers authorized to do business in the state where each Hotel is located, having a general policy holder’s rating of no less than B++ in Best’s latest rating guide.

(f)All such policies shall provide Owner, Manager and any holder of an Authorized Mortgage if required by the same, thirty (30) days’ prior written notice of any material

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change or cancellation of such policy and the property insurance policies shall provide for a waiver of subrogation, to the extent available.

13.3Insurance Certificates. Manager shall deliver to Owner, Purchaser and any holder of an Authorized Mortgage, certificates of insurance with respect to all policies so procured by it and, in the case of insurance policies about to expire, shall deliver certificates with respect to the renewal thereof. In the event Manager shall fail to effect such insurance as herein required, to pay the premiums therefor, or to deliver, within fifteen (15) days of a request therefor, such certificates, Owner shall have the right, but not the obligation, to acquire such insurance and pay the premiums therefor, which amounts shall be payable to Owner, upon demand, as an Operating Cost, together with interest accrued thereon at the Interest Rate (which interest shall not be an Operating Cost, but shall be paid by Manager) from the date such payment is made until (but excluding) the date repaid.

13.4Insurance Proceeds. All proceeds payable by reason of any loss or damage to a Hotel, or any portion thereof (other than the proceeds of any business interruption insurance), shall be paid directly to Purchaser as its interest may appear and all loss adjustments with respect to losses payable to Manager shall require the prior written consent of Purchaser.

13.5Manager’s Insurance Program.

(a)Manager will obtain quotations for insurance on an annual basis and provide, when available, such quotations to Owner for its approval or rejection. If Owner rejects such quotations, it may obtain such insurance and thereafter Owner shall maintain, as an Operating Cost, the insurance, the quotation for which Owner rejected.

(b)Owner acknowledges that in the event the insurance required hereunder is provided through Manager’s insurance program, to the extent available, the costs and charges therefore will be paid as an Operating Cost without regard to whether such payment is to an Affiliate of Manager and whether that Affiliate receives a profit as a result thereof.

ARTICLE 14

INDEMNIFICATION AND WAIVER OF SUBROGATION

14.1Indemnification. Each of the parties hereto shall indemnify, defend and hold harmless the other for, from and against any cost, loss, damage or expense (including, but not limited to, reasonable attorneys fees and all court costs and other expenses of litigation, whether or not taxable under local law) to the extent caused by or arising from: the failure of the indemnifying party to duly and punctually perform any of its obligations owed to the other; or any gross negligence or willful misconduct of the indemnifying party.

14.2Waiver of Subrogation. To the fullest extent permitted by law, each of Owner and Manager hereby waives any and all rights of subrogation and right of recovery or cause of action, and agrees to release the other and Purchaser from liability for loss or

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damage to property to the extent such loss or damage is covered by valid and collectible insurance in effect at the time of such loss or damage or which would have been covered if the insurance required by this Agreement were being carried; provided, however, that such waiver shall be of no force or effect if the party benefiting therefrom fails to obtain and maintain the insurance required to be obtained and maintained by it. Such waivers are in addition to, and not in limitation or derogation of, any other waiver or release contained in this Agreement. Written notice of the terms of the above waivers shall be given to the insurance carriers of Owner and Manager, and the insurance policies shall be properly endorsed, if necessary, to prevent the invalidation of said policies by reason of such waivers.

14.3Survival. The terms of this Article 14 shall survive the expiration or earlier termination of this Agreement.

ARTICLE 15

DAMAGE TO AND DESTRUCTION OF THE HOTEL

15.1Termination.

(a)If during the Term any Hotel shall be totally or partially destroyed and the Hotel is thereby rendered Unsuitable for Its Permitted Use, (i) Manager may terminate this Agreement with respect to such Hotel on sixty (60) days’ written notice to Owner, or (ii) Owner may terminate this Agreement with respect to such Hotel by written notice to Manager, whereupon, this Agreement, with respect to such Hotel, shall terminate and Owner or Purchaser shall be entitled to retain the insurance proceeds payable on account of such damage.

(b)Notwithstanding any provisions of Section 15.2 below to the contrary, if damage to or destruction of any Hotel occurs during the last twenty four (24) months of the then Term (after giving effect to any exercised options to extend the same) and if such damage or destruction cannot reasonably be expected to be fully repaired and restored prior to the date that is twelve (12) months prior to the end of such Term, then either Owner or Manager may terminate this Agreement with respect to such Hotel on not less than thirty (30) days’ advance notice.

(c)Upon any termination under this Article 15 or 16, the Owner’s Priority shall be reduced, and provided there is then no uncured Manager Default and the Priority Coverage Ratio for the Hotels (other than such Hotel with respect to which this Agreement has been so terminated) for the prior Fiscal Year is greater than 1.0, Owner shall return to Manager the portion of the Deposit allocable to such terminated Hotel as set forth on Exhibit C. In calculating the reduction in Owner’s Priority, the allocation of Owner’s Priority for each Hotel shall be proportional to the NOI of such Hotel for the then most recently ended twelve (12) months relative to the NOI of all the other Hotels for such period.

(d)Manager hereby waives any statutory rights of termination which may arise by reason of any damage to or destruction of any Hotel.

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15.2Restoration.

(a)If during the Term any Hotel is damaged or destroyed by fire, casualty or other cause but is not rendered Unsuitable for Its Permitted Use, Owner shall make the net proceeds of insurance received in connection with such casualty (excluding the proceeds of business interruption or similar insurance which are a portion of Gross Revenues) and any other amount Owner elects to contribute toward restoration available to Manager for restoration of such Hotel subject to customary terms applicable to advances and construction loans (to the extent applicable) and the terms of the Lease and any Authorized Mortgage, and Owner shall make, or shall cause there to be made, all Repairs necessary to restore such Hotel to substantially the same condition as existed prior to such casualty. If Owner elects to retain Manager’s services in connection with such Repairs, the terms of Section 11.1 shall apply.

(b)Any casualty which does not result in a termination of this Agreement with respect to the applicable Hotel shall not excuse the payment of sums due to Owner hereunder with respect to such Hotel.

(c)If the net proceeds of the insurance received in connection with a casualty or an Award received in connection with a Condemnation are insufficient to complete the required Repairs, Owner shall have the right (but not the obligation) to contribute (or cause Purchaser to contribute) the amount of such insufficiency. If Owner elects not to contribute such insufficiency by notice given to Manager within ten (10) Business Days after a notice given by Manager to Owner reasonably detailing the existence of such insufficiency, Manager shall have the right to contribute such insufficiency. If Manager fails to contribute such insufficiency to an account of Owner to be used in completing such Repairs within ten (10) Business Days after Owner’s election, the Hotel subject to such casualty or Condemnation shall be deemed Unsuitable for its Permitted Use and the terms of Section 15.1 or 16.1, as applicable, shall apply. Subject to the terms of Section 10.1, Manager shall be entitled to the return of amounts funded by it under this Section 15.2(c) in equal monthly installments based upon the number of months remaining in the Term after the month in which such advance is made (after giving effect to any then exercised or deemed exercised options to extend).

ARTICLE 16

CONDEMNATION

16.1Total Condemnation. If either (x) the whole of a Hotel shall be taken by Condemnation, or (y) a Condemnation of less than the whole of a Hotel renders such Hotel Unsuitable for Its Permitted Use, this Agreement shall terminate with respect to such Hotel and Owner and Purchaser shall seek the Award for their interests in such Hotel as provided in the Lease, which Award shall belong solely to them. In addition, Manager shall have the right to initiate or participate in such proceedings as it deems advisable to recover any damages to which Manager may be entitled; provided, however, that Manager shall be entitled to retain the award or compensation it may obtain through such proceedings which are conducted separately from those of Owner and Purchaser only if such award

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or compensation does not reduce the award or compensation otherwise available to Owner and Purchaser. If this Agreement is so terminated with respect to a Hotel, Owner and Purchaser shall make reasonable efforts to use the Award to acquire a Replacement Property proposed by Manager to which this Agreement shall be extended; provided, however:

(a)Purchaser and Owner shall not be obligated to expend in the aggregate more than the Award in connection with (i) investigating and negotiating to purchase all properties proposed by Manager to be the Replacement Property (including, without limitation, attorneys’ and consultants’ fees and title search and survey costs) and (ii) acquiring a Replacement Property (including, without limitation, the purchase price therefor, title insurance premiums and transfer taxes);

(b)Purchaser and Owner shall have no obligation to acquire any proposed Replacement Property unless the projected NOI thereof and each of every other aspect of the proposed Replacement Property which Purchaser reasonably considers relevant is comparable in Purchaser’s sole judgment in all respect to the Hotel which is being replaced;

(c)Purchaser and Owner shall not be obligated to investigate more than three (3) proposed properties;

(d)Owner’s Priority will be increased by an amount equal to the reduction therein resulting from the termination of this Agreement with respect to the Hotel which is being replaced; and

(e)Purchaser shall not be obligated to acquire any proposed Replacement Property, if Manager and Owner do not reasonably agree upon an appropriate amendment hereto pursuant to which this Agreement will be extended to such property.

If Purchaser decides to acquire a proposed Replacement Property, simultaneously with such acquisition the Lease and this Agreement shall be appropriately amended so as to cover such Replacement Property.

16.2Partial Condemnation. In the event of a Condemnation of less than the whole of a Hotel such that such Hotel is not rendered Unsuitable for Its Permitted Use, Owner shall, to the extent of the Award and any additional amounts disbursed by Owner or Purchaser, commence promptly and continue diligently to restore the untaken portion of such Hotel so that such Hotel shall constitute a complete architectural unit of the same general character and condition (as nearly as may be possible under the circumstances) as existed immediately prior to such Condemnation, in full compliance with all Legal Requirements, using the Award made available therefor and any other funds Owner elects to contribute subject to customary terms applicable to advances of construction loans (to the extent applicable). If Owner elects to retain Manager’s services in connection therewith, the terms of Section 11.1 shall apply.

16.3Temporary Condemnation. In the event of any temporary Condemnation of a Hotel or Owner’s interest therein, this Agreement shall continue in full force and effect. The

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entire amount of any Award made for such temporary Condemnation allocable to the Term, whether paid by way of damages, rent or otherwise, shall constitute Gross Revenues. For purposes of this Agreement, a Condemnation shall be deemed to be temporary if the period of such Condemnation is not expected to, and does not, exceed twelve (12) months.

16.4Effect of Condemnation. Any condemnation which does not result in a termination of this Agreement in accordance with its terms with respect to the applicable Hotel shall not excuse the payment of sums due to Owner hereunder with respect to such Hotel and this Agreement shall remain in full force and effect as to such Hotel.

ARTICLE 17

DEFAULT AND TERMINATION

17.1Manager Events of Default. Each of the following shall constitute a “Manager Event of Default:”

(a)The filing by Manager, or the Guarantor of a voluntary petition in bankruptcy or insolvency or a petition for reorganization under any bankruptcy law, or the admission by Manager, or the Guarantor that it is unable to pay its debts as they become due, or the institution of any proceeding by Manager, or the Guarantor for its dissolution or earlier termination.

(b)The consent by Manager, or the Guarantor to an involuntary petition in bankruptcy or the failure to vacate, within ninety (90) days from the date of entry thereof, any order approving an involuntary petition with respect to Manager, or the Guarantor.

(c)The entering of an order, judgment or decree by any court of competent jurisdiction, on the application of a creditor, adjudicating Manager, or the Guarantor as bankrupt or insolvent or approving a petition seeking reorganization or appointing a receiver, trustee, or liquidator of all or a substantial part of Manager’s, or the Guarantor’s assets, and such order, judgment or decree’s continuing unstayed and in effect for an aggregate of sixty (60) days (whether or not consecutive).

(d)The failure of Manager or the Guarantor or any Affiliate of any of them to make any payment required to be made in accordance with the terms of this Agreement or any Transaction Document which failure continues beyond any applicable notice and grace period.

(e)The failure of Manager, its Ultimate Parent, the Collateral Agent or any Guarantor or any Affiliate of any of them to perform, keep or fulfill any of the other covenants, undertakings, obligations or conditions set forth in this Agreement or any Transaction Document on or before the date required for the same, which failure continues for a period of thirty (30) days after receipt of written notice demanding such cure; provided, however, if such failure is susceptible of cure, but such cure cannot be accomplished within said thirty (30) day period, said thirty (30) days shall be extended for so long as is reasonably necessary to effect such cure provided that such cure is commenced within

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thirty (30) days after such notice is given and is thereafter diligently pursued to completion.

(f)The failure of Manager to maintain insurance coverages required to be maintained by Manager under this Agreement.

(g)The failure by Manager, its Ultimate Parent or any Guarantor to deliver to Owner any financial statement as and when required by the Transaction Documents, which failure continues for a period of ten (10) Business Days after written notice from Owner.

(h)Any representation or warranty made by Manager or any of its Affiliates in this Agreement or any Transaction Document proves to have been false in any material respect on the date when made or deemed made; provided, however, if Manager did not know of such falseness at the time such representation or warranty was made, and the facts or circumstances giving rise to such falseness are susceptible of cure, Manager shall have up to thirty (30) days after notice from Owner to effectuate such cure.

(i)The failure of any Ultimate Parent of Manager or the Guarantor to timely and fully keep and observe any obligations under the Transaction Documents or any other document or instrument executed and delivered in connection herewith to maintain any net worth, unencumbered assets or to deliver any collateral, in all cases, required under the Transaction Documents, which is not cured within ten (10) days after notice from Owner to Manager.

17.2Remedies for Manager Defaults. So long as a Manager Event of Default shall be outstanding, Owner shall have (in addition to its other rights and remedies at law, in equity or otherwise) the right to terminate this Agreement. Upon such termination, or if this Agreement is terminated pursuant to Sections 5.1 or 10.3, Owner shall be entitled to liquidated damages. Owner’s right to receive liquidated damages has been agreed to due to the uncertainty, difficulty and/or impossibility of ascertaining the actual damages suffered by Owner. Further, if not for Owner’s right to receive such liquidated damages, Purchaser would not have entered into the Purchase Agreement, Purchaser would not have acquired the Hotels and Owner would not have entered into the Lease. MANAGER HEREBY ACKNOWLEDGES AND AGREES THAT SUCH LIQUIDATED DAMAGES ARE NOT A PENALTY, BUT ARE TO COMPENSATE OWNER AND ITS AFFILIATES FOR THE EXPENSE AND LOST EARNINGS WHICH MAY RESULT FROM ARRANGING SUBSTITUTE MANAGEMENT FOR THE HOTELS AS WELL AS TO COMPENSATE FOR THE RENT OWNER MUST PAY UNDER THE LEASE AND THE PRICE PAID FOR THE HOTELS BY OWNER’S AFFILIATE. Such liquidated damages shall be equal to the sum of (i) the sum of (A) Fifty Million Dollars ($50,000,000) less (B) the aggregate amount paid by the Guarantor under Section 3 of the Guaranty in excess of the aggregate amount reimbursed to the Guarantor pursuant to Section 10.1(l), plus (ii) the outstanding balance of the Deposit. Owner shall be entitled to interest, at the Interest Rate, on such liquidated damages from the date of such termination until the date of payment of such damages and interest. Except with respect to Owner’s rights and remedies for any breach or violations by Manager of the

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terms of Section 17.4, Owner shall look solely to the Deposit or any other collateral hereafter pledged securing Manager’s obligations hereunder for satisfaction of any claim of Owner against Manager hereunder, provided, however, nothing contained herein is intended to, nor shall limit or reduce the obligations of the Guarantor under the Guaranty or limit Owner’s rights with respect thereto.

17.3Remedies for Owner Defaults. In the event Owner fails to perform its obligations hereunder, Manager shall have the right to institute forthwith any and all proceedings permitted by law or equity (provided they are not specifically barred under the terms of this Agreement), including, without limitation, actions for specific performance and/or damages; provided, however, except as may be expressly provided in this Agreement, Manager shall have no right to terminate this Agreement by reason of such a failure by Owner or otherwise. Manager shall be entitled to terminate this Agreement in the event of a violation of the terms of Section 4.7 by Purchaser or Owner. Except as otherwise specifically provided in this Agreement, Manager hereby waives all rights arising from any occurrence whatsoever, which may now or hereafter be conferred upon it by law, (a) to modify, surrender or terminate this Agreement or quit or surrender any Hotel or any portion thereof, or (b) to obtain (i) any abatement, reduction, suspension or deferment of the sums allocable or otherwise payable to Owner or other obligations to be performed by Manager hereunder or (ii) any increase in any amounts payable to Manager hereunder. The obligations of each party hereunder shall be separate and independent covenants and agreements.

17.4Post Termination Obligations. Upon expiration or earlier termination of this Agreement for any reason, Owner and Manager shall proceed as follows:

(a)Within sixty (60) days following the effective date of such expiration or earlier termination, Manager will submit to Owner an audited final accounting of the results of Hotel operations and all accounts between Owner and Manager through the effective date of such expiration or earlier termination, the cost of which audit shall be shared equally by Manager and Owner and shall not be an Operating Cost and shall be performed by Ernst & Young or another accounting firm selected by Manager and approved by Owner. Said final accounting will promptly be submitted by Manager to Owner for its approval. Owner shall not unreasonably withhold or delay its approval of the final accounting and any such disapproval shall contain reasonably detailed explanation for disapproval. Within thirty (30) days after delivery of such final accounting, the parties will make appropriate adjustments to any amounts previously paid or due under this Agreement.

(b)On the effective date of such expiration or earlier termination, Manager will deliver to Owner all books and records of the Hotels, provided that Manager may retain copies of any of the same for Manager’s records. Notwithstanding the foregoing, Manager will not be required to deliver to Owner any information or materials (including, without limitation, software, database, manuals and technical information) which are proprietary property of Manager.

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(c)On the effective date of such expiration or earlier termination, Manager will deliver possession of the Hotels, together with any and all keys or other access devices, to Owner.

(d)On the effective date of such expiration or earlier termination Manager will assign to Owner or its designee, and Owner or such designee will assume, all booking, reservation, service and operating contracts relating exclusively to the occupancy or operation of the Hotels and entered into in the ordinary course of business by Manager in accordance with this Agreement. Owner agrees to indemnify and hold Manager harmless from liability or other obligations under any such agreements relating to acts or occurrences, including Owner’s or such designee’s failure to perform, on or after the effective date of such assignment.

(e)Manager will assign to Owner or its designee any assignable licenses and permits pertaining to the Hotels and will otherwise reasonably cooperate with Owner as may be necessary for the transfer of any and all Hotel licenses and permits to Owner or Owner’s designee.

(f)Manager shall release and transfer to Owner or Purchaser, as applicable, any funds of Owner or Purchaser which are held or controlled by Manager.

(g)Manager shall have the option, to be exercised within thirty (30) days after termination or expiration, to purchase, at their then book value, any FF&E, Operating Equipment or other personal property as may be marked with any System Mark at the Hotels. In the event Manager does not exercise such option, Owner agrees that it will use any such items not so purchased exclusively in connection with the Hotels until they are consumed; provided however, Manager shall not be entitled to purchase FF&E, Operating Equipment or other personal property located at a Hotel which is to be operated under the Brand name or by Manager, until such Hotel shall no longer be so operated.

(h)Owner shall have the right to operate the improvements on the applicable Sites without modifying the structural design of same and without making any Material Repair, notwithstanding the fact that such design or certain features thereof may be proprietary to Manager or its Affiliates and/or protected by trademarks or service marks held by Manager or an Affiliate, provided that such use shall be confined to the applicable Sites. Further, provided that the applicable Hotels then satisfy the Brand Standards (unless the Hotels fail to satisfy such Brand Standards due to a breach hereof by Manager), Owner shall be entitled (but not obligated) to operate such of the Hotels as Owner designates under the Brand name for a period of one (1) year following such termination in consideration for which Owner shall pay the then standard franchise and system fees for the Brand and comply with the other applicable terms and conditions of the form of franchise agreement then being entered into with respect to the Brand.

(i)Manager shall transfer to Owner the telephone numbers used in connection with the operation of the Hotels (but not the Brand generally).

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(j)Manager shall cooperate with Owner’s or its designees’ efforts to engage employees of the Hotels.

(k)If requested by Owner prior to such expiration or earlier termination of this Agreement in whole or in part, Manager shall continue to manage under the Brand any affected Hotels designated by Owner after such expiration or earlier termination for up to one (1) year, on such reasonable terms (which shall include an agreement to reimburse Manager for its reasonable out-of-pocket costs and expenses, and reasonable administrative costs and a management fee of seven and one-half percent (7.5%) of Gross Revenues as Owner and Manager shall reasonably agree.

The provisions of this Section 17.4 shall survive the expiration or earlier termination of this Agreement.

17.5Deposit.

(a)As security for (i) the faithful observance and performance by the Manager of all the terms, covenants and conditions of this Agreements to be observed and performed by the Manager, including, without limitation, the payment of the Owner’s Percentage Priority and the Residual Distribution pursuant to this Agreement, and (ii) the payment to Owner on the first day each month of the installment of Owner’s Priority for such month regardless of the inadequacy of the Gross Revenues or Operating Profit for any month for such purpose (all of the foregoing, collectively, the “Secured Obligations”), Manager has deposited with Owner simultaneously with the execution and delivery hereof the sum of Sixteen Million Eight Hundred Seventy Two Thousand Dollars ($16,872,000) (as the same may be drawn down and replenished from time to time pursuant to this Agreement, the “Deposit”). The Owner shall have the option to elect, in its sole discretion, whether and when to apply funds from the Deposit with respect to any of the Secured Obligations; provided however, Owner shall not apply the Deposit to any Secured Obligation for which the Guarantor is responsible under the Guaranty unless (a) the Guarantor shall have failed to pay any amount due under the Guaranty for a period of five (5) days after notice or (b) an event described in Sections 17.1(a), 17.1(b) or 17.1(c) shall have occurred with respect to the Guarantor.

(b)Upon the expiration of the Term, provided, there is then no uncured Manager Default, the Owner shall return the outstanding balance of the Deposit to Manager. In addition, if the Term is duly extended by Manager beyond the Initial Term, on not less than two (2) years’ prior notice from the Manager to Owner, Owner shall return the outstanding balance of the Deposit to Manager upon the expiration of the Initial Term or the first Renewal Term and its receipt and approval of the statements required to be delivered pursuant to Section 8.1(c) for the last four (4) calendar years of the Initial Term or the Renewal Term, as applicable, which approval shall not be unreasonably withheld, conditioned or delayed provided that:

(i)there is the no uncured Manager Default;

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(ii)each installment of Owner’s Priority for every month during the Initial Term and, if applicable, the first Renewal Term, shall have been paid together with any interest accrued thereon;

(iii)the Priority Coverage Ratio for all of the Hotels in the aggregate for each of the four calendar years prior to the expiration of the Initial Term or first Renewal Term, as applicable, shall be not less than 1.3; and

(iv)the Owner’s Priority shall be increased by an amount equal to the aggregate sum of all of the Hotels’ Adjustments to Owner’s Priority set forth on Exhibit C.

(c)Owner may commingle the Deposit with its other funds and any interest earned on account of the Deposit shall be for the benefit of the Owner.

(d)If HPT’s credit rating as of the day that is twelve (12) months before the end of the Term from the Rating Agencies (as defined in the Guarantee) shall be less than BBB-/Baa 3, then during the last twelve (12) months of the Term, provided there is at all times thereafter no uncured Manager Default, Manager shall be entitled to reduce the monthly installments of Owner’s Priority payable by Manager for each of the last twelve (12) months of the Term, by an amount equal to one-twelfth (1/12^th) of the then remaining balance of the Deposit and, if Manager makes such election, Owner shall be entitled to retain a portion of the Deposit equal to the amount by which the Owner’s Property is so reduced in the aggregate.

ARTICLE 18

NOTICES

18.1Procedure.

(a)Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Agreement shall be deemed adequately given if in writing and the same shall be delivered either by hand, by telecopier with written acknowledgment of receipt (provided if notice is given by telecopier, a copy shall also be sent on the following Business Day by Federal Express or similar expedited commercial carrier), or by Federal Express or similar expedited commercial carrier, addressed to the recipient of the notice, with all freight charges prepaid (if by Federal Express or similar carrier).

(b)All notices required or permitted to be sent hereunder shall be deemed to have been given for all purposes of this Agreement upon the date of acknowledged receipt, in the case of a notice by telecopier, and, in all other cases, upon the date of receipt or refusal, except that whenever under this Agreement a notice is either received on a day which is not a Business Dayor is required to be delivered on or before a specific day which is not a Business Day, the day of receipt or required delivery shall automatically be extended to the next Business Day.

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(c)All such notices shall be addressed as follows:

If to Owner:	HPT TRS IHG-1, INC.
		c/o Hospitality Properties Trust
		400 Centre Street
		Newton, Massachusetts 02458
		Attn: President
		Facsimile: 617/969-5730

with a copy to: Sullivan & Worcester LLP
	One Post Office Square
	Boston, Massachusetts 02109
	Attn: Warren M. Heilbronner, Esq.
	Facsimile: 617-338-2880

If to Manager: Intercontinental Hotels Group
	Resources, Inc.
	c/o Six Continents Hotels, Inc.
	3 Ravinia Drive, Suite 100
	Atlanta, Georgia 30346
	Attn: Vice President of Operations
	Facsimile: 770-604-8875

with a copy to: Intercontinental Hotels Group
	Resources, Inc.
	c/o Six Continents Hotels, Inc.
	3 Ravinia Drive, Suite 100
	Atlanta, Georgia 30346
	Attn: General Counsel - Operations
	Facsimile: 770-604-5802

(d)By notice given as herein provided, the parties hereto and their respective successors and assigns shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses effective upon receipt by the other parties of such notice and each shall have the right to specify as its address any other address within the United States of America.

ARTICLE 19

RELATIONSHIP, AUTHORITY AND FURTHER ACTIONS

19.1Relationship. Manager shall be the agent of Owner with a limited agency solely for the purpose of operating the Hotels and carrying out ordinary and customary transactions for that purpose. Manager shall not have fiduciary duties to Owner by virtue of this Agreement. Owner and Manager shall not be construed as joint venturers or partners of each other, and neither shall have the power to bind or obligate the other except as set forth in this Agreement. Manager shall not constitute a tenant or subtenant of Owner and this Agreement shall not constitute Owner a franchisee of Manager or of any of Manager’s Affiliates. This Agreement shall not create a franchise or a franchisor/franchisee relationship within the meaning of the Federal Trade Commission

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Act, any rule or regulation promulgated, or any other state or federal law, rule or regulation or administrative or judicial decision.

19.2Further Actions. Each of the parties agrees to execute all contracts, agreements and documents and take all actions necessary to comply with the provisions of this Agreement and the intent hereof.

ARTICLE 20

APPLICABLE LAW

This Agreement shall be interpreted, construed, applied and enforced in accordance with the laws of the State of New York applicable to contracts between residents of New York which are to be performed entirely within New York, regardless of (a) where this Agreement is executed or delivered, (b) where any payment or other performance required by this Agreement is made or required to be made, (c) where any breach of any provision of this Agreement occurs, or any cause of action otherwise accrues, (d) where any action or other proceeding is instituted or pending, (e) the nationality, citizenship, domicile, principal place of business, or jurisdiction of organization or domestication of any party, (f) whether the laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction other than Massachusetts, (g) the location of the Hotels or any applicable Hotel, or (h) any combination of the foregoing.

ARTICLE 21

SUCCESSORS AND ASSIGNS

21.1Assignment.

(a)Except as expressly provided below, Manager shall not assign, mortgage, pledge, hypothecate or otherwise transfer its interest in all or any portion of this Agreement or any rights arising under this Agreement or suffer or permit such interests or rights to be assigned, transferred, mortgaged, pledged, hypothecated or encumbered, in whole or in part, whether voluntarily, involuntarily or by operation of law, or permit the management of the Hotels by anyone other than Manager or Owner. For purposes of this Section 21.1, an assignment of this Agreement shall be deemed to include any transaction which results in Manager no longer being an Affiliate of Guarantor or pursuant to which all or substantially all of Manager’s assets are transferred to any Person who is not an Affiliate of Guarantor.

(b)Manager shall have the right, without Owner’s consent, to (i) assign its interest in this Agreement (i) to IHG or any Affiliate of IHG provided such assignee satisfies the requirements of Section 24.15, (ii) in connection with a merger, corporate restructuring or consolidation of IHG or a sale of all or substantially all of the assets of IHG and (iii) in connection with a sale of all or substantially all of the assets (including associated management agreements) owned by IHG and its Affiliates relating to the Brand. If Owner and its Affiliates shall own or lease more than fifty percent (50%) of the hotels comprising the Brand, IHG shall not, and Manager shall cause IHG not to, transfer all or substantially all of the assets of IHG relating to the Brand other than to a Person who at

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all times is an Affiliate of IHG. At Owner’s election, Manager shall assign this Agreement to any Person who is not an Affiliate of IHG that acquires all or substantially all of the assets of IHG relating to the Brand and shall cause such Person to assume all of Manager’s obligations thereafter accruing hereunder.

(c)Owner shall not assign, mortgage, pledge, hypothecate or otherwise transfer its interest in all or any portion of this Agreement or any rights arising under this Agreement without the prior written consent of Manager except (i)in connection with a sale of a Hotel in accordance with the terms of Sections 4.4 and 4.5, (ii) to Purchaser or an Affiliate of Purchaser,(iii) to Manager or an Affiliate of Manager, (iv) to an Affiliate of Owner in a merger, corporate restructuring or consolidation of Purchaser or any of its Affiliates,(v) in connection with the granting of an Authorized Mortgage or (vi) to a Substitute Tenant as provided in Section 4.2; provided, however, in each instance (other than in connection with a collateral assignment) that the assignee hereof assumes all of Owner’s obligation hereunder and under the other Transaction Documents thereafter accruing.

(d)In the event either party consents to an assignment of this Agreement by the other, no further assignment shall be made without the express consent in writing of such party, unless such assignment may otherwise be made without such consent pursuant to the terms of this Agreement. An assignment by Owner of its interest in this Agreement approved or permitted pursuant to the terms hereof shall relieve Owner of its obligations under this Agreement thereafter accruing.

(e)In the event fifty percent (50%) or more of the hotels comprising the Brand cease to be Staybridge Suites hotels and are converted to another brand in a single transaction or a series of related transactions, Owner may elect to require Manager to promptly convert at its own cost and expense (and not as an Operating Cost and without reimbursement from the Reserve Account) the Hotels to the brand of hotels to which such other hotels are converted. In such event, all references herein to “Staybridge Suites” shall be deemed to refer to the trade name of the system of hotels to which the Hotels are to be so converted.

21.2Binding Effect. The terms, provisions, covenants, undertakings, agreements, obligations and conditions of this Agreement shall be binding upon and shall inure to the benefit of the successors in interest and the assigns of the parties hereto with the same effect as if mentioned in each instance where the party hereto is named or referred to, except that no assignment, transfer, sale, pledge, encumbrance, mortgage, lease or sublease by or through Owner, as the case may be, in violation of the provisions of this Agreement shall vest any rights in the assignee, transferee, purchaser, secured party, mortgagee, pledgee, lessee, sublessee or occupant.

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ARTICLE 22

RECORDING

22.1Memorandum of Agreement. As of the Effective Date, at the option of Manager, Owner and Manager agree to execute, acknowledge and record a Memorandum of this Agreement in the land records of the states and counties where the Hotels are located, in a form reasonably satisfactory to Manager.

ARTICLE 23

FORCE MAJEURE

23.1Operation of Hotel. If at any time during the Term it becomes necessary in Manager’s reasonable opinion to cease or alter operations at any Hotel in order to protect the health, safety and welfare of the guests and/or employees of such Hotel, or such Hotel itself, for reasons of force majeure beyond the control of Manager such as, but not limited to, acts of war, insurrection, civil strife and commotion, labor unrest or acts of God, then in such event Manager may close and cease or alter operation of all or part of such Hotel, reopening and commencing or resuming operation when Manager deems that such may be done without jeopardy to such Hotel, its guests and employees.

23.2Extension of Time. Owner and Manager agree that, with respect to any obligation, other than the payment of money, to be performed by a party during the Term, neither party will be liable for failure so to perform when prevented by any occurrence beyond the reasonable control of such party, herein referred to as a “force majeure” including, without limitation, occurrences such as strike, lockout, breakdown, accident, order or regulation of or by any governmental authority, failure of supply or inability, by the exercise of reasonable diligence, to obtain supplies, parts or employees necessary to perform such obligation, or war or other emergency. The time within which such obligation must be performed will be extended for a period of time equivalent to the number of days of delay from such cause.

ARTICLE 24

GENERAL PROVISIONS

24.1Trade Area Restriction. Notwithstanding anything to the contrary in this Agreement, neither Manager nor any Affiliate shall acquire, own, manage, operate or open any hotel as a “Staybridge Suite” hotel nor shall Manager or any Affiliate authorize a third party to operate or open any hotel as a “Staybridge Suite” hotel that is within the Restricted Area of any Hotel during its Restricted Period, unless such hotel (a) is owned or leased by Owner or its Affiliate; (b) is owned, operated, managed, franchised or under development on the Effective Date and has been specifically identified in writing at or prior to the time of the execution of the Purchase Agreement; or (c) is part of an acquisition by IHG or its Affiliates of an interest (including an interest as a franchisor) in a chain or group of not less than ten (10) hotels (such acquisition to occur in a single transaction or a series of related transactions). The terms of this Section 24.1 shall apply only to “Staybridge Suites” hotels and shall not in any way restrict the ownership, management, franchising or operation other brands or flags of any hotels owned or operated by Manager or its Affiliates within the Restricted Area.

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24.2Environmental Matters.

(a)Manager shall not store, spill upon, dispose of or transfer to or from any Hotel any Hazardous Substance, except in compliance with all Legal Requirements. Manager shall maintain the Hotels at all times free of any Hazardous Substance (except in compliance with all Legal Requirements). Manager (i) upon receipt of notice or knowledge shall promptly notify Purchaser and Owner in writing of any material change in the nature or extent of Hazardous Substances at any Hotel, (ii) shall file and transmit to Purchaser and Owner a copy of any Community Right to Know report which is required to be filed by the Manager with respect to any Hotel pursuant to SARA Title III or any other Legal Requirements, (iii) shall transmit to Purchaser and Owner copies of any citations, orders, notices or other governmental communications received by Manager with respect thereto (collectively, “Environmental Notice”), which Environmental Notice requires a written response or any action to be taken and/or if such Environmental Notice gives notice of and/or presents a material risk of any material violation of any Legal Requirement and/or presents a material risk of any material cost, expense, loss or damage, (iv) shall observe and comply with all Legal Requirements relating to the use, maintenance and disposal of Hazardous Substances and all orders or directives from any official, court or agency of competent jurisdiction relating to the use or maintenance or requiring the removal, treatment, containment or other disposition thereof, and (v) shall pay or otherwise dispose of any fine, charge or imposition related thereto.

(b)In the event of the discovery of Hazardous Substances other than those maintained in accordance with Legal Requirements on any portion of any Site or in any Hotel during the Term, Manager shall use reasonable efforts promptly (i) clean up and remove from and about such Hotel all Hazardous Substances thereon, if appropriate, (ii) contain and prevent any further release or threat of release of Hazardous Substances on or about such Hotel, and (iii) use good faith efforts to eliminate any further release or threat of release of Hazardous Substances on or about such Hotel, and (iv) otherwise effect a remediation of the problem in accordance with (A) the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., as amended; (B) the regulations promulgated thereunder, from time to time; (C) all Federal, state and local laws, rules and regulations (now or hereafter in effect) dealing with the use, generation, treatment, storage, disposal or abatement of Hazardous Substances; and (D) the regulations promulgated thereunder, from time to time (collectively referred to as “Environmental Laws”).

(c)To the extent any service required to be performed under this Section 24.2 or cost incurred under this Section 24.2 is not due to the fault of Manager or is not performed or incurred in the operations of the Hotels in the ordinary course, the same shall be governed by Section 11.1; provided, however, to the extent that Section 11.1 shall apply to such services or costs, Owner shall be entitled to engage a third party to perform such services.

24.3Authorization. Owner represents that it has full power and authority to execute this Agreement and to be bound by and perform the terms hereof. Manager represents it

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has full power and authority to execute this Agreement and to be bound by and perform the terms hereof. On request, each such party will furnish to the other evidence of such authority.

24.4Severability. If any provision of this Agreement shall be held or deemed to be, or shall in fact be, invalid, inoperative or unenforceable as applied to any particular case in any jurisdiction or jurisdictions, or in all jurisdictions or in all cases, because of the conflict of any provision with any constitution or statute or rule of public policy or for any other reason, such circumstance shall not have the effect of rendering the provision or provisions in question invalid, inoperative or unenforceable in any other jurisdiction or in any other case or circumstance or of rendering any other provision or provisions herein contained invalid, inoperative or unenforceable to the extent that such other provisions are not themselves actually in conflict with such constitution, statute or rule of public policy, but this Agreement shall be reformed and construed in any such jurisdiction or case as if such invalid, inoperative or unenforceable provision had never been contained herein and such provision reformed so that it would be valid, operative and enforceable to the maximum extent permitted in such jurisdiction or in such case.

24.5Merger. This Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof.

24.6Formalities. Any amendment or modification of this Agreement must be in writing signed by all parties hereto. This Agreement may be executed in one or more counterparts, each of which will be deemed an original. The captions for each Article are intended for convenience only.

24.7Consent to Jurisdiction; No Jury Trial.

(a)Except as provided in Section 24.19, all actions and proceedings arising out of or in any way relating to this Agreement shall be brought, heard, and determined exclusively in an otherwise appropriate federal or state court located within the State of New York. Except as provided in Section 24.19, the parties hereby (a) submit to the exclusive jurisdiction of any New York federal or state court of otherwise competent jurisdiction for the purpose of any action or proceeding arising out of or relating to this Agreement and (b) voluntarily and irrevocably waive, and agree not to assert by way of motion, defense, or otherwise in any such action or proceeding, any claim or defense that they are not personally subject to the jurisdiction of such a court, that such a court lacks personal jurisdiction over any party or the matter, that the action or proceeding has been brought in an inconvenient or improper forum, that the venue of the action or proceeding is improper, or that this Agreement may not be enforced in or by such a court. To the maximum extent permitted by applicable law, each party consents to service of process by registered mail, return receipt requested, or by any other manner provided by law.

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(b)To the maximum extent permitted by applicable law, each of the parties hereto waives its rights to trial by jury with respect to this Agreement or matter arising in connection herewith.

24.8Performance on Business Days. In the event the date on which performance or payment of any obligation of a party required hereunder is other than a Business Day, the time for payment or performance shall automatically be extended to the first Business Day following such date.

24.9Attorneys’ Fees. If any lawsuit or arbitration or other legal proceeding arises in connection with the interpretation or enforcement of this Agreement, the prevailing party therein shall be entitled to receive from the other party the prevailing party’s costs and expenses, including reasonable attorneys’ fees incurred in connection therewith, in preparation therefor and on appeal therefrom, which amounts shall be included in any judgment therein.

24.10Section and Other Headings. The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

24.11Documents. Throughout the Term, Owner agrees to furnish Manager copies of all notices relating to real and personal property taxes and insurance statements, all financing documents (including notes and mortgages) relating to the Hotel and such other documents pertaining to the Hotels as Manager may request.

24.12No Consequential Damages. Except as may be expressly provided herein, in no event shall either party be liable for any consequential, exemplary or punitive damages suffered by the other as the result of a breach of this Agreement. Time is of the essence with respect to this Agreement.

24.13No Political Contributions. Notwithstanding anything contained in this Agreement to the contrary, no money or property of the Hotels shall be paid or used or offered, nor shall Owner or Manager directly or indirectly use or offer, consent or agree to use or offer, any money or property of the Hotels (i) in aid of any political party, committee or organization, (ii) in aid of any corporation, joint stock or other association organized or maintained for political purposes, (iii) in aid of any candidate for political office or nomination for such office, (iv) in connection with any election, (v) for any political purpose whatever, or (vi) for the reimbursement or indemnification of any person for any money or property so used.

24.14REIT Qualification. Manager shall, as an Operating Cost, take all actions reasonably requested by Owner or Purchaser as may be necessary to ensure that Purchaser’s rental income from Owner under the Lease qualifies as “rents from real property” pursuant to Sections 856(d)(2), 856(d)(8)(B) and 856(d)(9) of the Code; provided, however, any additional costs or expenses (including internal costs and expenses) incurred by Manager in complying with such a request shall be borne by Owner (and

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shall not be an Operating Cost) to the extent the same together with the costs to Manager referred to in Section 24.16 exceeds $25,000 over the Term in the aggregate.

24.15Further Compliance with Section 856(d) of the Code. Throughout the Term (including the Effective Date), the Manager shall qualify as an “eligible independent contractor” as defined in Section 856(d)(9)(A) of the Code. To that end, Manager:

(a)shall not permit wagering activities to be conducted at or in connection with any Hotel by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such Hotel;

(b)shall use reasonable efforts to cause each Hotel to qualify as a “qualified lodging facility” under Section 856(d)(9)(D) of the Code;

(c)shall not own, directly or indirectly or constructively (within the meaning of Section 856(d)(5) of the Code), more than thirty five percent (35%) of the shares of HPT (whether by vote, value or number of shares), and Manager shall otherwise comply with any regulations or other administrative or judicial guidance now or hereafter existing under said Section 856(d)(5) of the Code with respect to such ownership limits; and

(d)shall be actively engaged (or shall, within the meaning of Section 856(d)(9)(F) of the Code, be related to a person that is so actively engaged) in the trade or business of operating “qualified lodging facilities” (defined below) for a person who is not a “related person” within the meaning of Section 856(d)(9)(F) of the Code with respect to HPT or Owner (“Unrelated Persons”). In order to meet this requirement, the Manager agrees that it (or any “related person” with respect to Manager within the meaning of Section 856(d)(9)(F) of the Code) (i) shall derive at least ten percent (10%) of both its revenue and profit from operating “qualified lodging facilities” for Unrelated Persons and (ii) shall comply with any regulations or other administrative or judicial guidance under Section 856(d)(9) of the Code with respect to the amount of hotel management business with Unrelated Persons that is necessary to qualify as an “eligible independent contractor” within the meaning of such Code Section.

(e)A “qualified lodging facility” is defined in Section 856(d)(9)(D) of the Code and means a “lodging facility” (defined below), unless wagering activities are conducted at or in connection with such facility by any person who is engaged in the business of accepting wagers and who is legally authorized to engage in such business at or in connection with such facility. A “lodging facility” is a hotel, motel or other establishment more than one-half of the dwelling units in which are used on a transient basis, and includes customary amenities and facilities operated as part of, or associated with, the lodging facility so long as such amenities and facilities are customary for other properties of a comparable size and class owned by other owners unrelated to HPT.

24.16Adverse Regulatory Event. In the event of an Adverse Regulatory Event arising from or in connection with this Agreement, Owner and Manager shall work together in good faith to amend this Agreement to eliminate the impact of such Adverse Regulatory Effect; provided, however, Manager shall have no obligation to materially reduce its

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rights or materially increase its obligation under this Agreement, all taken as a whole, or to bear any costs or expenses (including internal costs and expenses) in excess of $25,000 in the aggregate over the Term under Section 24.14 and this Section 24.16. For purposes of this Agreement, the term “Adverse Regulatory Effect” means any time that a law, statute, ordinance, code, rule or regulation imposes (or could impose in Owner’s reasonable opinion) any material threat to HPT’s status as a “real estate investment trust” under the Code or to the treatment of amounts paid to such Purchaser as “rents from real property” under Section 856(d) of the Code. Each of Manager and Owner shall inform the other of any Adverse Regulatory Event of which it is aware and which it believes likely to impair compliance of any of the Hotels with respect to the aforementioned sections of the Code.

24.17Commercial Leases. Manager shall not enter into any sublease with respect to any Hotel (or any part thereof) unless the same has been approved by Purchaser in its sole and absolute discretion; provided, however, Manager may sublease or grant concessions or licenses to shops or any other space at a Hotel subject to the following terms and conditions: (a) subleases and concessions are for newsstand, gift shop, parking garage, heath club, restaurant, bar or commissary purposes or similar concessions; (b) such subleases and concessions do not have a term in excess of lesser of five (5) years or the remaining Term under this Agreement; (c) such subleases and concessions do not demise, (i) in the aggregate, in excess of Two Thousand (2,000) square feet of any Hotel, or (ii) for any single sublease, in excess of Five Hundred (500) square feet of any Hotel; (d) any such sublease, license or concession to an Affiliate of a Manager shall be on terms consistent with those that would be reached through arms-length negotiation; (e) for so long as Purchaser or any Affiliate of Purchaser shall seek to qualify as a real estate investment trust under the Code, anything contained in this Agreement to the contrary notwithstanding, Manager shall not sublet or otherwise enter into any agreement with respect to a Hotel on any basis such that in the opinion of the Owner the rental or other fees to be paid by any sublessee thereunder would be based, in whole or in part, on either (i) the income or profits derived by the business activities of such sublessee, or (ii) any other formula such that any portion of such sublease rental would fail to qualify as “rents from real property” within the meaning of Section 865(d) of the Internal Revenue Code of 1986, as amended, or any similar or successor provision thereto; (f) such lease or concession will not violate or affect any Legal Requirement or Insurance Requirement; (g) Manager shall obtain or cause the subtenant to obtain such additional insurance coverage applicable to the activities to be conducted in such subleased space as Owner and any mortgagee under an Authorized Mortgage may reasonably require; and (b) not less than twenty (20) days prior to the date on which Manager proposes to enter into any sublease or concession, Manager shall provide a copy thereof to Owner.

24.18Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING PURCHASER, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT, AND MANAGER HEREBY AGREES THAT, THE NAME “HPT IHG PROPERTIES TRUST” REFERS TO THE TRUSTEES UNDER THE DECLARATION

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COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF PURCHASER SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, PURCHASER. ALL PERSONS DEALING WITH PURCHASER, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF PURCHASER FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

24.19Arbitration.

(a)Whenever in this Agreement it is provided that a dispute is to be resolved by an Arbitration, such dispute shall be finally resolved pursuant to an arbitration before a panel of three (3) arbitrators who will conduct the arbitration proceeding in accordance with the provisions of this Agreement and the rules of the American Arbitration Association. Unless otherwise mutually agreed by Owner and Manager, the arbitration proceedings will be conducted in New York, New York. All arbitrators appointed by or on behalf of either party shall be independent persons with recognized expertise in the operation of hotels of similar size and class as the Hotels with not less than five (5) years’ experience in the hotel industry. The party desiring arbitration will give written notice to that effect to the other party, specifying in such notice the name, address and professional qualifications of the person designated as arbitrator on its behalf. Within fifteen (15) days after service of such notice, the other party will give written notice to the party desiring such arbitration specifying the name, address and professional qualifications of the person designated to act as arbitrator on its behalf. The two arbitrators will, within fifteen (15) days thereafter, select a third, neutral arbitrator. As soon as possible after the selection of the third arbitrator, and no later than fifteen (15) days thereafter, the parties will submit their positions on each disputed item in writing to the three arbitrators. The decision of the arbitrators so chosen shall be given within a period of twenty (20) days after the appointment of such third arbitrator. The arbitrators must, by majority vote, agree upon and approve the substantive position of either Owner or Manager with respect to each disputed item, and are not authorized to agree upon or impose any other substantive position which has not been presented to the arbitrators by Manager or Owner. It is the intention of the parties that the Arbitrator’s rule only on the substantive positions submitted to them by the parties and the Arbitrators are not authorized to render rulings which are a compromise as to any such substantive position. A decision in which any two (2) arbitrators so appointed and acting hereunder concur in writing with respect to each disputed item shall in all cases be binding and conclusive upon Owner and Manager and a copy of said decision shall be forwarded to the parties. The parties request that the Arbitrator assess the costs and expenses of the Arbitration and their fees against the parties based on a finding as to which parties substantive positions were not upheld. Otherwise the fees and expenses of the arbitration will be treated as an Operating Cost unless otherwise determined by the arbitrators.

(b)If the party receiving a request for Arbitration fails to appoint its arbitrator within the time above specified, or if the two arbitrators so selected cannot agree on the selection of the third arbitrator within the time above specified, then either party, on behalf of both

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parties, may request such appointment of such second or third arbitrator, as the case may be, by application to any judge of any court in New York County, New York of competent jurisdiction upon ten (10) days’ prior written notice to the other party of such intent.

(c)If there shall be a dispute with respect to whether a party has unreasonably withheld, conditioned or delayed its consent with respect to a matter for which such party has agreed herein not to unreasonably withhold its consent, such dispute shall be resolved by Arbitration.

(d)Any disputes under Sections 2.1 or 7.6 shall be resolved by Arbitration; provided, however, notwithstanding the foregoing, Owner shall be entitled to seek and obtain injunctive and other equitable relief if it believes there has been a breach of Manager’s obligation under either of said Sections.

24.20Estoppel Certificates. Each party to this Agreement shall at any time and from time to time, upon not less than fifteen (15) days’ prior notice from the other party, execute, acknowledge and deliver to such other party, or to any third party specified by such other party, a statement in writing:  (a) certifying that this Agreement is unmodified and in full force and effect (or if there have been modifications, that the same, as modified, is in full force and effect and stating the modifications); (b) stating whether or not to the best knowledge of the certifying party (i) there is a continuing default by the non-certifying party in the performance or observance of any covenant, agreement or condition contained in this Agreement, or (ii) there shall have occurred any event which, with the giving of notice or passage of time or both, would become such a default, and, if so, specifying each such default or occurrence of which the certifying party may have knowledge; (c) stating the date to which distributions of Operating Profits have been made; and (d) stating such other information as the non-certifying party may reasonably request. Such statement shall be binding upon the certifying party and may be relied upon by the non-certifying party and/or such third party specified by the non-certifying party as aforesaid, including, without limitation its and its Affiliates’ lenders and any prospective purchaser or mortgagee of any Hotel.

24.21Confidentiality.

(a)The parties hereto agree that the matters set forth in this Agreement and the information provided pursuant to the terms hereof are strictly confidential and each party will make every effort to ensure that the information is not disclosed to any outside person or entities (including the press) without the prior written consent of the other party except may be required by law and as may be reasonably necessary to obtain licenses, permits, and other public approvals necessary for the refurbishment or operation of the Hotels, or in connection with financing, proposed financing, sale or proposed sale.

(b)No reference to Manager or to any of its Affiliates will be made in any prospectus, private placement memorandum, offering circular or offering documentation related thereto (collectively referred to as the “Prospectus”), issued by Owner or any of its Affiliates, which is designated to interest potential investors in a Hotel, unless Manager

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(c)has previously received a copy of all such references. However, regardless of whether Manager does or does not so receive a copy of all such references, neither Manager nor any of its Affiliates will be deemed a sponsor of the offering described in the Prospectus, nor will it have any responsibility for the Prospectus, and the Prospectus will so state. Unless Manager agrees in advance, the Prospectus will not include any trademark, symbols, logos or designs of Manager or any of its Affiliates.

24.22Hotel Warranties. Manager shall be entitled to enforce in the name of Owner any warranties held by Owner with respect to the Hotels or any portion thereof.

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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement effective as of the day and year first above written.

OWNER:
HPT TRS IHG-1, INC.
By:	/s/ John G. Murray
Name:			John G. Murray
Title:		Vice President
MANAGER:
INTERCONTINENTAL HOTELS GROUP RESOURCES, INC.
By:	/s/ Robert G. Gunkel
Name:			Robert G. Gunkel
Title:			Vice President

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Purchaser in consideration of good and valuable consideration, joins in the foregoing Agreement to evidence its agreement to be bound by the terms of Sections 4.1 through and including 4.7 and Articles 15 and 16 thereof subject to the terms of Section 24.18.

PURCHASER:
HPT IHG PROPERTIES TRUST
By:	/s/ John G. Murray
Name:			John G. Murray
Title:		President
Date of Execution: July 1, 2003

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THE FOLLOWING EXHIBITS HAVE BEEN OMITTED AND WILL BE SUPPLEMENTALLY FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST:

Exhibit	Document
A		The Sites
B		Opening Dates
C		Allocations
D		Restricted Area

A-1

EX-10.18

Exhibit 10.18

FIRST AMENDMENT TO MANAGEMENT AGREEMENT

THIS FIRST AMENDMENT TO MANAGEMENT AGREEMENT (this “Amendment”) is made as of September 18, 2003 by and between INTERCONTINENTAL HOTELS GROUP RESOURCES, INC., a Delaware corporation (“Manager”), and HPT TRS IHG-1, INC., a Maryland corporation (“Owner”).

WHEREAS, Manager and Owner entered into that certain Management Agreement, dated as of July 1, 2003 (the “Management Agreement”); and

WHEREAS, Manager and Owner wish to amend the Management Agreement to, among other things, include the Hotels located at the Sites listed on Exhibit A attached hereto(the “Expansion Hotels”);

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are herein acknowledged, Owner and Manager, intending to be legally bound, hereby agree as follows:

1.Capitalized terms used in this Amendment and not otherwise defined herein shall have the meaning ascribed thereto in the Management Agreement.

2.Section 1.10 of the Management Agreement is amended by deleting from the first and second line the phrase “for each Hotel, the 2004 Fiscal Year” and inserting the following in its place:

with respect to each Original Hotel, the 2004 Fiscal Year, and with respect to each Expansion Hotel, the 2006 Fiscal Year;

3.Section 1.10 of the Management Agreement is further amended by inserting after the phrase “the 2004 Fiscal Year” on the fifth line thereof the phrase “or the 2006 Fiscal Year, as applicable.”

4.Sections 1.11 and 1.12 of the Management Agreement are deleted in their entirety and the following inserted in their place:

1.11 “Brand”  shall mean, collectively, the Staybridge Suites hotel service marks or, with respect to the Buckhead Hotel, the service marks of the Buckhead Brand, the Brand Standards, and all of the attributes

and features customarily associated with the Staybridge Suites hotel chain in North America or, with respect to the Buckhead Hotel, the Buckhead Brand, in either case, from time to time.

1.12 “Brand Standards”  shall mean the standards of operation, as amended from time to time, in effect at substantially all hotels which are operated under the Staybridge Suites name as may be specified in manuals and other guidelines provided by the owner of the System Marks or its Affiliates; provided, however, with respect to the Buckhead Hotel, the term “Brand Standards” shall mean the standards of operation from time to time required of owners of similar hotels.

5.Section 1.66 of the Management Agreement is amended by inserting after the phrase “the 2004 Fiscal Year” the phrase “or the 2006 Fiscal Year, as applicable.”

6.Section 1.67 of the Management Agreement is amended by deleting the phrase “Sixteen Million Eight Hundred Seventy Two Thousand Dollars ($16,872,000)” and replacing it with “Thirty Six Million Eight Hundred Seventy Two Thousand Dollars ($36,872,000).”

7.Section 1.27 of the Management Agreement is amended by inserting the following at the end thereof:

The Deposit shall be increased as provided in Section 33 of the First Amendment.

8.Section 1.79 of the Management Agreement is amended by inserting “Original” after “each” in the first line thereof.

9.Section 1.79 of the Management Agreement is hereby further amended by inserting the following at the end thereof:

“Reserve Percentage” shall mean with respect to the Expansion Hotels, the following percentages for the following periods:

Through 12/31/06	0	%
Thereafter	5	%

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10.Section 1.82 of the Management Agreement is deleted in its entirety and replaced with the following:

1.82 “Restricted Period” shall mean, for each Original Hotel, the period ending on third(3^rd) anniversary of the Effective Date and for each Expansion Hotel, the period ending on the third (3^rd) anniversary of the Expansion Date.

11.Section 1.87 of the Management Agreement is deleted in its entirety and the following inserted in its place:

1.87 “Sites” shall mean, collectively, the parcels of real estate more particularly described in Exhibits A-1 and A-2.

12.Section 1.90 of the Management Agreement is amended by inserting after “hotels” in the last line thereof the following:

or with respect to the Buckhead Hotel, the Buckhead Brand.

13.There is inserted after Section 1.98 of the Management Agreement the following new Sections:

1.99 “Buckhead Brand” shall mean the then hotel brand under which the Buckhead Hotel is to be operated in accordance with Section 34(e) of the First Amendment.

1.100 “Buckhead Hotel” shall mean, the Hotel located at Pharr Road, Atlanta, Georgia.

1.101 “Expansion Date” shall mean, the later of (i) October 6, 2003 and (ii) the date on which Owner delivers possession of the Expansion Hotels to Manager.

1.102 “Expansion Hotel” shall mean, each Hotel located on a Site described in Exhibit A-2.

1.103 “First Amendment” shall that certain First Amendment To Management Agreement dated September 18, 2003 between Manager and Owner.

1.104 “Manager’s Share” shall mean a fraction, (a)the numerator of which is the amount of Initial Working Capital and (b)the denominator

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of which is the sum of (i) the amount of Initial Working Capital, plus (ii) $750,000.

1.105 “Original Hotel” shall mean each Hotel located on a Site described in Exhibit A-1.

14.Section 2.1 of the Management Agreement is amended by inserting the following after the second sentence thereof:

Owner acknowledges that the Expansion Hotels are to be converted to the Brand Standards following the Expansion Date. Manager shall complete such conversion promptly after the Expansion Date, but in all events on or before December 31, 2008; provided, however, Manager shall not be obligated to cause the Expansion Hotels to conform with the requirements of the Brand Standards which have been waived as set forth on Exhibit B to the First Amendment.

15.Section 2.6 of the Management Agreement is deleted and replaced with the following:

2.6  Condition of the Hotels. Manager acknowledges receipt and delivery of possession of each Original Hotel, and Manager accepts each Original Hotel and, subject to the terms of Sections 35, 36 and 41 of the First Amendment, each Expansion Hotel in its “as is” condition as of, respectively, the Effective Date and the Expansion Date, subject to the rights of parties in possession, the existing title, including all covenants, conditions, restrictions, reservations, mineral leases, easements and other matters of record or that are visible or apparent on the Hotels, all applicable Legal Requirements, and such other matters which would be disclosed by an inspection of the Hotels and the record title thereto or by an accurate survey thereof. MANAGER REPRESENTS THAT:  IT HAS INSPECTED THE HOTELS INCLUDING THE FF&E AND ALL OF THE FOREGOING AND HAS FOUND THE CONDITION THEREOF SATISFACTORY; AS OF THE EFFECTIVE DATE, THE ORIGINAL HOTELS ARE IN COMPLIANCE WITH THE BRAND STANDARDS IN ALL MATERIAL RESPECTS; EXCEPT FOR CAPITAL REPLACEMENT TO BE MADE FROM TIME TO TIME USING FUNDS TO BE DEPOSITED IN THE RESERVE ACCOUNT PURSUANT TO SECTION 5.2(a) AND SECTION 33 OF THE FIRST AMENDMENT, MANAGER CURRENTLY DOES

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NOT ANTICIPATED THE NEED TO MAKE CAPITAL REPLACEMENTS DURING THE FIRST FIVE YEARS OF THE TERM (PROVIDED, HOWEVER, SUCH REPRESENTATION IS NOT A GUARANTY OR WARRANTY THAT NO SUCH CAPITAL REPLACEMENT WILL BE REQUIRED); AND, EXCEPT AS PROVIDED IN SECTION 36 OF THE FIRST AMENDMENT, IT IS NOT RELYING ON ANY REPRESENTATION OR WARRANTY OF OWNER, PURCHASER OR ANY OF THEIR AGENTS OR EMPLOYEES WITH RESPECT TO ANY OF THE MATTERS SET FORTH IN THIS SECTION. SUBJECT TO THE TERMS OF SECTION 36 AND SECTION 37 OF THE FIRST AMENDMENT, MANAGER WAIVES ANY CLAIM OR ACTION AGAINST OWNER AND PURCHASER WITH RESPECT TO THE CONDITION OF THE HOTELS. EXCEPT AS PROVIDED IN SECTION 36 OF THE FIRST AMENDMENT, PURCHASER AND OWNER MAKE NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE HOTELS OR ANY PART THEREOF, EITHER AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR PATENT.

16.For purposes of determining whether Owner and its Affiliates own or lease at least fifty (50%) percent of the hotels comprising the Brand under Section 6.1 of the Management Agreement, the Expansion Hotels shall be excluded as though Expansion Hotels were neither owned or leased by Owner or its Affiliates and as though the Expansion Hotels were not a portion of the hotels comprising the brand.

17.The first sentence of Section 5.1 of the Management Agreement is deleted and replaced with the following:

Manager shall (a) contribute to the Working Capital for the Hotels an amount reasonably sufficient to pay (i) Operating Costs for the Original Hotels for the first thirty (30) days of operating the same following the Effective Date and (ii) Operating Costs for the Expansion Hotels for the first thirty (30) days of operating the same following the Expansion Date to the extent such Operating Costs for the Expansion Hotels for such period exceeds $750,000 collectively, the “Initial Working Capital”) and (b) upon the execution and delivery hereof, pay to Owner the monthly

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installment of Owner’s Priority for the month in which the Effective Date occurs.

18.On the Expansion Date Owner shall advance to Manager an amount equal to the excess of $750,000 over the actual Working Capital of the Expansion Hotels delivered to Manager on the Expansion Date. The amount so advanced shall be added to the Working Capital of the Hotels and used to pay Operating Costs as they come due.

19.The last sentence of Section 5.1 of the Management Agreement is deleted and replaced with the following:

Upon the expiration or earlier termination of the Term, the Working Capital of the Hotels shall be applied to pay all Operating Costs and all amounts owned to Owner to the extent Gross Revenues are insufficient. Thereafter, any remaining Working Capital shall be applied as follows:  (i) first, provided there is no uncured Manager Default, to Manager, Manager’s Share of any remaining Working Capital; and (ii) to Owner, the balance of the Working Capital.

20.Section 7.5 of the Management Agreement is amended by inserting at the end thereof the following:

Notwithstanding the foregoing, the Buckhead Hotel shall be included in the Reservation System for the Buckhead Brand, and Owner acknowledges that the other Expansion Hotels shall be added to the Reservation System as soon as practicable after the Expansion Date.

21.Section 7.7(a) of the Management Agreement is amended by inserting “and Section 33 of the First Amendment” after “7.7(b)” in the first line thereof.

22.Section 8.2(a) of the Management Agreement is amended by inserting the following after the first sentence thereof:

Notwithstanding the foregoing, (i) Manager shall not be obligated to prepare or deliver Yearly Budgets for the Expansion Hotels for the 2003 and 2004 Fiscal Years; (ii) Manager shall deliver to Owner, each month until January, 2005, Manager’s then most current forecast of the Expansion Hotels for the next twelve (12) months, which forecasts shall be

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in Manager’s customary form; and (iii) on or before December 15, 2003, Manager shall provide to Owner a month-by-month schedule of the draws from the Reserve Account which Manager anticipates to make during the 2004 and 2005 fiscal year in connection with renovating the Expansion Hotels; and (iv) Manager shall periodically provide Owner with updates to such schedule consistent with good management and construction practices.

23.There is inserted at the end of Section 9.1(a) of the Management Agreement, the following:

Notwithstanding anything contained herein to the contrary, to the extent that Base Management Fees for the Expansion Hotels for any Fiscal Year up to and including the Fiscal Year ending on December 31, 2008 are not paid in accordance with the terms hereof, the same shall not accrue from year to year, and Manager shall not be entitled to receive the payment thereof from the Gross Revenues of any subsequent Fiscal Year. For purpose of this Section 9.1(a), the Gross Revenues of the Expansion Hotels and the applications thereof shall be calculated separately from the calculations of the Gross Revenues and applications thereof of the Original Hotels.

24.The following is inserted at the end of the first sentence of Section 9.2 of the Management Agreement:

provided, however, Manager shall pay as Operating Costs, only the service fees (excluding franchise fees) generally payable by franchisees of the Buckhead Brand.

25.Section 10.1(c) is deleted in its entirety and replaced with the following:

(c)Third, to Owner, first, all Owner’s Priority then due and payable and then all accrued but unpaid Owner’s Priority which accrued pursuant to the terms of Section 10.3 during the Fiscal Year to which such Gross Revenues pertain;

26.The following is inserted after the first sentence of Section 10.3:

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Notwithstanding anything contained herein to the contrary, to the extent that for any Fiscal Month prior to January, 2006 Operating Profits attributable to the Expansion Hotels for such month are insufficient to pay the portion of Owner’s Priority attributable to such Hotels for such month, Manager may defer paying up to $333,333 of such portion of Owner’s Priority for such month. Amounts which are so deferred shall nevertheless be deemed accrued; provided, however, Owner shall not be entitled to payment of any amounts so deferred except as provided in Section 10.1(c) (i.e., the same shall not accrue from year to year but shall only be payable out of Gross Revenues of the Fiscal Year to which such deferred amounts pertain).

27.Section 17.3 of the Management Agreement is amended by changing the title thereof to “Owner Events of Default and Remedies for Owner Defaults” and inserting “any representation or warranty made by Owner in this Agreement proves to be untrue when made in any material respect or” after the word “event” in the first line thereof.

28.The phrase “Fifty Million Dollars ($50,000,000)” in Section 17.2 of the Management Agreement is hereby deleted in its entirety and is replaced with “Seventy Million Dollars ($70,000,000).”  Manager acknowledges and agrees that but for the liquidated damages clause contained in the Management Agreement as modified hereby, Owner would not enter into this Amendment.

29.Section 24.18 of the Management Agreement is deleted and replaced with:

Nonliability of Trustees. EACH DECLARATION OF TRUST ESTABLISHING EACH ENTITY COMPRISING PURCHASER, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (EACH, A “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT, AND MANAGER HEREBY AGREES THAT, THE NAMES “HPT IHG PROPERTIES TRUST” AND “HPTSHC PROPERTIES TRUST” REFER TO THE TRUSTEES UNDER THE APPLICABLE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF ANY ENTITY COMPRISING PURCHASER

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SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SUCH ENTITY. ALL PERSONS DEALING WITH ANY ENTITY COMPRISING PURCHASER, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF SUCH ENTITY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

30.Exhibit A to the Management Agreement is hereby amended by renaming it Exhibit A-1. Exhibit A to this Amendment is inserted as Exhibit A-2 to the Management Agreement after such Exhibit A-1.

31.Exhibit C to the Management Agreement is deleted in its entirety and replaced with Exhibit C attached hereto.

32.There is added to the end of Exhibit D to the Management Agreement the maps showing, or other descriptions of, the Restricted Areas for the Expansion Hotels set forth in Exhibit D hereto.

33.Manager agrees to increase the Deposit by Twenty Million Dollars ($20,000,000), and Owner agrees to, or cause Purchaser to, advance up to Thirty Million Dollars ($30,000,000) in the aggregate into the Reserve Account, all on the following terms and conditions:

(a)On or before the Expansion Date, Owner or Purchaser shall deposit in the Reserve Account Ten Million Dollars ($10,000,000), and Manager shall deliver to Owner Ten Million Dollars ($10,000,000) which shall be added to and be a part of the Deposit.

(b)On or before December 31, 2006, Manager shall deliver to Owner, in the aggregate, under this Section 33(b) and Section 33(e),an additional Ten Million Dollars ($10,000,000) which shall be added to and be a part of the Deposit.

(c)If, at any times prior to December 31, 2006, the funds in the Reserve Account shall be insufficient for the purposes for which the Reserve Account is maintained in Manager’s sole judgment, Manager shall give Owner written notice thereof, which notice shall set forth, in reasonable detail, the calculation of such insufficiency and such other information with respect thereto as Owner may reasonably require. Provided that there is then no uncured Manager Default, Owner shall, within twenty (20) Business Days after such notice, advance (or cause Purchaser to advance) the amount of such insufficiency to Manager for

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deposit into the Reserve Account. Owner hereby consents to the Material Repairs to be made by Manager, and expenditures made from the Reserve Account in connection therewith, prior to December 31, 2006 to cause the Expansion Hotels to comply with applicable Brand Standards or to correct any deferred maintenance thereto.

(d)There shall be no adjustment to Owner’s Priority on account of the first Twenty Million Dollars ($20,000,000) advanced by Owner or Purchaser pursuant to this Section 33. However, the annual amount of Owner’s Priority shall be increased by ten percent (10%) of the excess of the aggregate amount advanced under this Section 33 over Twenty Million Dollars ($20,000,000). Such increase shall be effective as of the dates on which such excess advances are made. Except as provided herein, there shall be no adjustment to Owner’s Priority on account of advances made pursuant to this Section 33.

(e)Unless and until the Deposit shall have been increased by Twenty Million Dollars ($20,000,000) in the aggregate under Sections 33(a)and 33(b), the aggregate amount to be advanced by Owner or Purchaser pursuant to Sections 33(a)and 33(c) shall not exceed such aggregate increase to the Deposit.

(f)The maximum aggregate amount to be advanced pursuant to Sections 33(a)and 33(c) is Thirty Million Dollars ($30,000,000), and Owner shall not be obligated to, or to cause Purchaser to, advance any amounts under this Section 33 in excess of such maximum aggregate amount.

(g)No advances shall be requested under this Section 33 after December 31, 2006.

34.The following terms shall apply to the Buckhead Hotel:

(a)The Buckhead Hotel will be operated as a Buckhead Brand hotel. Accordingly, notwithstanding anything contained in the Management Agreement, any reference to “Staybridge Suites” or the “Brand” in the Management Agreement shall with respect to the Buckhead Hotel only be deemed to refer to the Buckhead Brand.

(b)Manager may market the Buckhead Hotel for sale until December 31, 2009. If prior to such date Manager receives a bona fide arm’s-length binding unconditional offer to purchase the Buckhead Hotel from an unrelated third party having the financial capacity to implement the terms of such offer for a purchase price acceptable to Manager and otherwise on customary terms (an “Offer”), Manager shall

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give Owner and Purchaser notice thereof, which notice shall include a copy of the Offer executed by such third party. In the event that Owner and Purchaser shall fail to accept or reject such Offer within thirty (30) days after receipt of such notice, such Offer shall be deemed to be rejected by them. If Owner and Purchaser shall either sell the Buckhead Hotel pursuant to such Offer, or reject such Offer, effective as of the date of such sale or, if the Offer was rejected or deemed rejected, the proposed date of sale contained in such Offer, as the case may be, this Agreement shall terminate with respect to the Buckhead Hotel, and the Owner’s Priority shall be reduced by an amount equal to ten percent (10%) of the net proceeds of sale received by Owner or Purchaser or, in the case of such a rejection, the projected net proceeds determined by reference to such Offer. If any Offer is accepted by Purchaser and Owner, but the sale pursuant thereto is not consummated, Manager shall continue to have the right to market the Buckhead Hotel on the foregoing terms.

(c)The terms of Sections 4.4 and 4.7 of the Management Agreement shall not apply to any sale of the Buckhead Hotel made pursuant to an Offer delivered by Manager.

(d)If the Management Agreement with respect to the Buckhead Hotel shall expire or terminate other than in connection with the sale thereof as herein contemplated, Owner shall be entitled (but not obligated) to operate the Buckhead Hotel under the Buckhead Brand name for a period of one (1) year following such termination in accordance with the terms of the Management Agreement and the payment of any applicable Services Fee; provided, however, Owner shall not be obligated to incur any additional cost or expense in connection with any Capital Replacement to or at the Buckhead Hotel to the extent attributable solely to complying with the Buckhead Brand standards.

(e)Manager shall elect, by notice given to Owner promptly after the date hereof, the hotel brand under which the Buckhead Hotel shall be operated. From time to time, with the prior written consent of Owner (which consent shall not be unreasonably withheld), Manager may elect to change the hotel brand under which the Buckhead Hotel will be operated.

35.Owner shall, or shall cause Purchaser to, promptly after the date hereof give Candlewood Management, Inc. (“Candlewood”) a notice terminating the existing management agreement with Candlewood (the “Candlewood Management Agreement”) with respect to the Expansion Hotels in accordance with the terms of Section 7.2 thereof. In connection therewith, Owner shall direct Candlewood to (a)

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reasonably cooperate with Manager in order to effectuate a smooth turnover of the management and operations of the Expansion Hotels; (b) provide Manager full access to the Expansion Hotels from and after the date hereof through and including the Expansion Date; (c) on the Expansion Date transfer to Manager all FF&E reserves and capital replacement reserves held by Candlewood; (d) on the Expansion Date transfer to Manager any and all reservations fees, advanced deposits and similar prepaid items; (e) on the Expansion Date transfer all telephone numbers used in connection with the operation of the Expansion Hotels; (f) cooperate with Manager in Manager’s efforts to engage employees of the Expansion Hotels; (g) on the Expansion Date deliver to Manager all books and records of the Expansion Hotels, provided that Candlewood may retain copies of any of the same for Candlewood’s records; (h) on the Expansion Date, deliver possession of the Expansion Hotels, together with any and all keys or other access devices to Manager; (i) effective as of the Expansion Date, assign to Manager all booking, reservation, service and operating contracts relating to exclusively to the occupancy or operation of the Expansion Hotels and entered into in the ordinary course of business by Candlewood; (j) effective as of the Expansion Date, assign to Manager any assignable licenses and permits pertaining to the Expansion Hotels and otherwise reasonably cooperate with Manager as may be necessary for the transfer of any and all hotel licenses and permits to Manager. Neither Owner nor Purchaser shall have any liability to Manager for Candlewoods failure to do any of the foregoing; provided, however, Owner shall, or shall cause Purchaser to, use its reasonable efforts to enforce the terms of said management agreement and attempt to cause Candlewood to do the foregoing.

36.HPTSHC Properties Trust (“HPTSHC”) warrants and represents that: its investigation of the Expansion Hotels made in connection with the acquisition of the Expansion Hotels was conducted in a manner consistent in all material respects with the standards generally employed by HPTSHC, Owner and their Affiliates(collectively, the “HPT Group”) in connection with their acquisitions of hotel properties; and, based on such investigation, when HPTSHC acquired the Expansion Hotels it believed that the statements in Exhibit E (other than the statement in paragraph Error! Reference source not found. thereof) were true in all material respects except as disclosed in the materials previously furnished or obtained by Manager or otherwise disclosed in writing to, or known by, Manager. Manager shall have the right, subject to the receipt of any required consents and the terms of any applicable agreement, to pursue, in the name of HPTSCH, any and all rights HPTSCH may have under or

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with respect to any title insurance policy, engineering report, survey, zoning opinion or report or environmental study obtained by HPTSHC in connection with such acquisition. The terms of Section 40 shall apply to any recovery by Manager in connection therewith.

37.Each of HPTSHC and Owner warrants and represents to Manager that, except as disclosed in the materials previously furnished or obtained by Manager or otherwise disclosed in writing to, or known by, Manager: it has not done anything since the date of its acquisition of the Expansion Hotels to cause any of the statements in Exhibit E to be untrue in any material respect on the Expansion Date; and to Owner’s Knowledge the statements in Exhibit E are true in all material respects as of the date hereof. HPTSHC and Owner shall not between the date hereof and the Expansion Date do anything which causes the statements in Exhibit E to be untrue in any material respect on the Expansion Date.

38.The representations and warranties made in this Agreement by Owner and HPTSHC are made as of the date hereof. All representations and warranties made in this Agreement by HPTSHC and Owner shall survive the Expansion Date.

39.As used herein, the term “Owner’s Knowledge” shall mean the actual (and not the imputed or constructive) knowledge of John Murray without any inquiry of other personnel employed by the HPT Group. HPTSHC and Owner warrant and represent to Manager that John Murray is the officer of the HPT Group to whom any condition which would render any of the statements in Exhibit E untrue in any material respect should be reported by any employee of the HPT Group that first discovers such condition and that the HPT Group has in place, either formally or informally, systems designed to make sure that John Murray receives such reports.

40.Any amounts recovered during the Term by Owner or Manager from any third party (other than from or in respect of any claim of the HPT Group against Wyndham International, Inc., Summerfield HPT Lease Company, L.P. or any of their Affiliates) with respect a defective condition at any of the Expansion Hotels in excess of the cost of recovering the same (including, without limitation, attorneys’ fees) shall be deposited into the Reserve Account or applied as the parties reasonably agree.

41.Owner shall be responsible for any and all costs or expenses of owning and operating the Expansion Hotels prior to the Expansion Date (including, without limitation,

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all applicable real and personal property, sales, hotel-motel, excise, gross receipts and use taxes and assessments and any accrued unpaid vacation, sick leave and similar benefits owed to existing employees of the Expansion Hotels who are employed at the Expansion Hotels on the Expansion Date. Owner shall pay when due such costs and expenses itself or timely advance funds to Manager to pay such costs and expenses. Owner shall file or cause to be filed all returns for any tax periods prior to the tax period in which the Expansion Date occurs.

42.Except to the extent solely attributable to matters pertaining to or arising from or in connection with any act or omission of Manager or its Affiliates, Owner shall indemnify, defend and hold harmless Manager and its Affiliates for, from and against any cost, loss, damage or expense including, but not limited to, reasonable attorneys’ fees and all court costs and other expenses of litigation, whether or not taxable under local law (each, a “Loss and Expense”) for any claims of any nature whatsoever made by each of Candlewood, Wyndham International, Inc., Summerfield HPT Lease Company, L.P. or any of their respective Affiliates pertaining to the Expansion Hotels. Such indemnity is subject to the following terms and conditions:

(a)If Manager or its Affiliate suffer or incur any Loss and Expense or any action is commenced against, or claim is made or threatened against, Manager or its Affiliate against which Owner is to indemnify Manager or its Affiliate, Manager or its Affiliate shall give Owner notice thereof within thirty (30) days of becoming aware that it has suffered such Loss and Expense or of such action or claim.

(b)Owner shall conduct and control, through counsel of its own choosing, reasonably acceptable to Manager or its Affiliate, any third party action or claim, but the indemnified party may, at its election, participate in the defense thereof at its sole cost and expense. Manager and its Affiliates shall cooperate with Owner in defending any claim or action for which indemnity is sought hereunder. Such cooperation shall include access during normal business hours afforded to Owner to, and reasonable retention by Manager and its Affiliates of, records and information which are reasonably relevant to such action or claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.

(c)If Owner shall fail to defend any action or claim, then Manager or its Affiliate may defend, through counsel of its

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own choosing, such action or claim, and (so long as it gives Owner at least fifteen (15) days’ notice of the terms of the proposed settlement thereof and permits Owner to then undertake the defense thereof) settle such action or claim and to recover from Owner or HPTSHC the amount of such settlement or of any judgment and the reasonable costs and expenses of such defense.

(d)Owner shall be entitled to compromise or settle any such action or claim without the prior written consent of Manager, provided it or HPTSHC pays all amounts due under this Section 42 and the terms and conditions of such compromise or settlement:(i) include a full release of Manager and its affected Affiliates from the action or claim which is the subject of the settlement proposal; and (ii) do not include any term or condition which would restrict in any material manner the continued management and operations of the Expansion Hotels in substantially the manner then being managed and operated by Manager or which would impose any continuing obligations or liability of any nature on Manager or its Affiliates.

43.Manager hereby consents to the amendment to the Lease of even date herewith pursuant to which Owner leases the Expansion Hotels from HPTSHC.

44.All references in the Management Agreement to the Management Agreement shall be deemed to be references thereto as amended hereby.

45.If the Expansion Date does not occur on or before December 31, 2003, this Amendment shall terminate and be of no further force or effect. Such termination shall not release or relieve either party from any breach hereof theretofore accruing.

46.As modified hereby, the Management Agreement is in full force and effect and is hereby ratified and confirmed.

47.This Amendment may be executed in one or more counterparts, all of which counterparts shall constitute but one and the same document.

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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Amendment effective as of the day and year first above written.

OWNER:
HPT TRS IHG-1, INC.
By:	/s/ John G. Murray
Name:		John G. Murray
Title:			Vice President
MANAGER:
INTERCONTINENTAL HOTELS
GROUP RESOURCES, INC.
By:	/s/ Stevan D. Porter
Name:		Stevan D. Porter
Title:			President

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Purchaser in consideration of good and valuable consideration, joins in the foregoing Amendment to evidence its agreement to be bound by the terms of Section 34(b). In addition, HPTSHC Properties Trust joins in the foregoing Amendment to evidence its agreement to be bound by the terms of Sections 36 through and including 40 and Sections 4.1 through and including 4.7 of the Management Agreement and Articles 15 and 16 thereof subject to the terms of Section 24.18 thereof.

PURCHASER:
HPT IHG PROPERTIES TRUST
By:	/s/ John G. Murray
Name:		John G. Murray
Title:			President
Date of Execution:
HPTSHC PROPERTIES TRUST
By:	/s/ John G. Murray
Name:		John G. Murray
Title:			President
Date of Execution:

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THE FOLLOWING EXHIBITS HAVE BEEN OMITTED AND WILL BE SUPPLEMENTALLY FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST:

Exhibit	Document
Exhibit A	Exhibit A-2 to the Management Agreement
Exhibit A-2	Legal Descriptions
Exhibit B	Waiver of Brand Standards for the Expansion
	Hotels
Exhibit C	Substitute Exhibit C to the Management Agreement
Exhibit D	Restricted Areas for the Expansion Hotels
Exhibit E	Condition of the Expansion Hotels

EX-10.19

Exhibit 10.19

SECOND AMENDMENT TO MANAGEMENT AGREEMENT

THIS SECOND AMENDMENT TO MANAGEMENT AGREEMENT (this “Amendment”) is made as of March    , 2004 by and between INTERCONTINENTAL HOTELS GROUP RESOURCES, INC., a Delaware corporation (“Manager”), and HPT TRS IHG-1, INC., a Maryland corporation (“Owner”).

WITNESSETH:

WHEREAS Owner and Manager have entered into that certain Management Agreement dated as of July 1, 2003 (the “Original Management Agreement”), as amended by First Amendment to Management Agreement dated as of September 18, 2003 (the “First Amendment”; the Original Management Agreement as so amended, the “Management Agreement”); and

WHEREAS the Management Agreement contemplated the possible sale of the Buckhead Hotel (as defined in the Management Agreement); and

WHEREAS Manager has requested that Owner and HPTSHC Properties Trust (“HPT”) enter into a certain Agreement of Purchase and Sale with Manager and Pharr Lodge, LLC with respect to the Buckhead Hotel (the “Contract”); and

WHEREAS, Owner and HPT are willing to enter into the Contract only if this Amendment is executed and delivered by Manager.

NOW, THEREFORE, in consideration of the premises, the mutual promises and covenants herein contained and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, Owner and Manager, intending to be legally bound, hereby agree as follows:

1.If the Closing under the Contract shall occur, Owner’s Priority (as defined in the Management Agreement) shall be reduced as provided in Section 34(b) of the First Amendment and the phrase “net proceeds of sale received by Owner or Purchaser” as used in said Section 34(b) shall mean the actual amount received by Owner and HPT under the Contract by wire transfer of immediately available funds net of (without duplication) closing costs charged to, paid or to be paid by Owner or HPT (including, without limitation, those specified in Section 12.03 of the Contract). Further to the foregoing, the parties acknowledge and agree that to the extent such actual amount received by Owner and HPT is increased or decreased by reason of the closing adjustments required under the Contract (including, without limitation, those specified in Article IV and Section 10.02 of the Contract), said “net proceeds of sale received by Owner or Purchaser” will be adjusted.

2.All post-Closing adjustments to closing adjustments under the Contract shall be for the account of Manager. Accordingly, Manager shall be entitled to any amounts payable by Buyer on account of post-Closing adjustments and shall pay (out of its own funds) any post-Closing adjustments due to Buyer.

3.If any adjustment to Owner’s Priority on account of the sale of the Buckhead Hotel shall occur other than on the first day of a month, the monthly installment of Owner’s Priority

for the month in which such adjustment occurs shall be prorated on a daily basis. Owner’s Priority shall be adjusted on account of the sale of the Buckhead Hotel effective as of the date Owner or HPT receives the sale proceeds therefrom if such proceeds are received prior to 2:00 P.M. Eastern Standard Time on a Business Day (as defined in the Management Agreement) or on the next succeeding Business Day.

4.From and after such Closing, Manager shall indemnify Owner for any claims relating to (a) Buyer failing to perform the obligations under the Operating Agreements (as defined in the Contract) assumed by it and (b) the Buckhead Hotel for which Manager is responsible under the Management Agreement (determined without regard to any termination thereof in its entirety or in part).

5.Before and after the Closing, Manager shall indemnify Owner and HPT for any claims made by Buyer relating to any matter for which Manager is responsible under the Contract or the Management Agreement (determined without regard to any termination thereof in its entirety or in part).

6.Owner shall be responsible for termination of the existing franchise/license agreement pursuant to which the Hotel is currently operated as a Summerfield Suite Hotel effective as of the Closing.

7.All references in the Management Agreement to the Management Agreement shall be deemed to be references thereto as amended hereby.

8.As modified hereby, the Management Agreement is in full force and effect and is hereby ratified and confirmed.

9.This Amendment may be executed in one or more counterparts, all of which counterparts shall constitute but one and the same document.

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Amendment effective as of the day and year first above written.

MANAGER:
INTERCONTINENTAL HOTELS GROUP
RESOURCES, INC.
By:	/s/ Stevan Porter
Its:	President
OWNER:
HPT TRS IHG-1, INC.
By:		/s/ John G. Murray
Its:		Vice President

Each of the undersigned by their execution hereof evidence their consent to the foregoing and ratify and confirm their respective guaranties given in connection with the Management Agreement.

HOSPITALITY  PROPERTIES TRUST
By:	/s/ John G. Murray
Its:	President
INTERCONTINENTAL HOTELS GROUP PLC
By:	/s/ Stevan Porter
Its:	Director

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EX-10.20

Exhibit 10.20

THIRD AMENDMENT TO MANAGEMENT AGREEMENT

THIS THIRD AMENDMENT TO MANAGEMENT AGREEMENT (this “Third Amendment”) is made as of February 16, 2005 by and between HPT TRS IHG-1, INC., a Maryland corporation (“Owner”), and INTERCONTINENTAL HOTELS GROUP RESOURCES, INC., a Delaware corporation (“Manager”).

WHEREAS, Owner and Manager entered into that certain Management Agreement dated as of July 1, 2003, as amended by that certain First Amendment to Management Agreement dated as of September 18, 2003 and that certain Second Amendment to Management Agreement dated as of March, 2004 (as so amended, the “Management Agreement”); and

WHEREAS, Owner and Manager wish to amend the Management Agreement, subject to and upon the terms and conditions hereinafter provided;

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are herein acknowledged, Owner and Manager, intending to be legally bound, hereby agree as follows:

1.Capitalized terms used in this Third Amendment and not otherwise defined herein shall have the meaning ascribed thereto in the Management Agreement.

2.From and after the date hereof, Section 1.39 (“Guaranty”) of the Management Agreement is hereby deleted in its entirety and the following inserted in its place:

“Guaranty”  shall mean that certain Amended and Restated Consolidated Guaranty Agreement dated as of February        , 2005 made by IHG for the benefit of, inter alia, Owner, or, if applicable, the New Staybridge Guaranty (as defined in such Amended and Restated Consolidated Guaranty Agreement), as the same may be amended, supplemented or replaced from time to time excluding, however, the New Candlewood Guaranty (as defined in such Amended and Restated Consolidated Guaranty Agreement) as the same may be amended, supplemented or replaced from time to time.

3.Section 17.2 (“Remedies for Manager Default”) of the Management Agreement is hereby amended by deleting the sixth (6^th) sentence thereof in its entirety and inserting the following in its place:

Such liquidated damages shall be equal to the sum of (i) all accrued but unpaid amounts due to Owner hereunder up until the date of termination, plus (ii) the Outstanding Balance (as defined in the Guaranty), plus (iii) the outstanding balance of the Deposit.

4.All references in the Management Agreement to the Management Agreement shall be deemed to be references thereto as amended hereby.

5.As modified hereby, the Management Agreement is in full force and effect and is hereby ratified and confirmed.

6.This Third Amendment may be executed in one or more counterparts, all of which counterparts shall constitute but one and the same document.

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Third Amendment effective as of the day and year first above written.

OWNER:
HPT TRS IHG-1, INC.
By:	/s/ John G. Murray
	John G. Murray
	Vice President
MANAGER:
INTERCONTINENTAL HOTELS
GROUP RESOURCES, INC.
By:	/s/ Robert J. Chitty
	Robert J. Chitty
	Vice President

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EX-10.21

Exhibit 10.21

FOURTH AMENDMENT TO MANAGEMENT AGREEMENT

THIS FOURTH AMENDMENT TO MANAGEMENT AGREEMENT (this “Fourth Amendment”) is made as of January 6, 2006 by and between HPT TRS IHG-1, INC., a Maryland corporation (“Owner”), and INTERCONTINENTAL HOTELS GROUP RESOURCES, INC., a Delaware corporation (“Manager”).

WHEREAS, Owner and Manager entered into that certain Management Agreement dated as of July 1, 2003, as amended by that certain First Amendment to Management Agreement dated as of September 18, 2003, that certain Second Amendment to Management Agreement dated as of March, 2004 and that certain Third Amendment to Management Agreement dated as of February 16, 2005 (as so amended, the “Management Agreement”); and

WHEREAS, Owner and Manager wish to amend the Management Agreement, subject to and upon the terms and conditions hereinafter provided;

NOW, THEREFORE, in consideration of the mutual promises and covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are herein acknowledged, Owner and Manager, intending to be legally bound, hereby agree as follows:

1.             Capitalized Terms. Capitalized terms used in this Fourth Amendment and not otherwise defined herein shall have the meaning ascribed thereto in the Management Agreement.

2.             Disbursements. Section 10.1(k) of the Management Agreement is hereby deleted in its entirety and replaced with the following:

Eleventh, to replenish any portion of the Deposit which has been drawn upon, regardless of whether such draw was made in connection with the Secured Obligations or otherwise;

3.             Return of Deposit. Section 17.5(b) of the Management Agreement is hereby deleted in its entirety and replaced with the following:

The Owner shall return any outstanding balance of the Deposit to Manager within thirty (30) days following the date on which all of the Secured Obligations, and any other obligations secured by the Deposit in any written agreement signed by Manager, have been irrevocably satisfied in full.

In addition, Section 17.5(d) of the Management Agreement is hereby deleted in its entirety.

4.             References to Management Agreement. All references in the Management Agreement to the Management Agreement shall be deemed to be references thereto as amended hereby.

5.             Ratification. As modified hereby, the Management Agreement is in full force and effect and is hereby ratified and confirmed.

6.             Counterparts. This Fourth Amendment may be executed in one or more counterparts, all of which counterparts shall constitute but one and the same document.

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Fourth Amendment effective as of the day and year first above written.

OWNER:
HPT TRS IHG-1, INC.
By:	/s/ John G. Murray
	John G. Murray
	Vice President
MANAGER:
INTERCONTINENTAL HOTELS GROUP
RESOURCES, INC.
By:	/s/ Robert J. Chitty
	Robert J. Chitty
	Vice President

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EX-10.26

Exhibit 10.26

SECOND AMENDED AND RESTATED CONSOLIDATED GUARANTY AGREEMENT

THIS SECOND AMENDED AND RESTATED CONSOLIDATED GUARANTY AGREEMENT (this “Agreement”) is made and given as of January 20, 2006 by INTERCONTINENTAL HOTELS GROUP PLC, a corporation organized and existing under the laws of England and Wales (the “Guarantor”), for the benefit of HPT TRS IHG-1, INC., a Maryland corporation (together with its successors and assigns, “TRS1”), HPT TRS IHG-2, INC., a Maryland corporation (together with its successors and assigns, “TRS2”), HPT TRS IHG-3, INC., a Maryland corporation (together with its successors and assigns, “TRS3”), HPT IHG PR, INC., a Puerto Rico corporation (together with its successors and assigns, “PR Landlord”), (from and after the JM Lease (as hereinafter defined) is executed) JM LANDLORD (as hereinafter defined) and HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust together with its successors and assigns, “Trust”; and Trust together with TRS1, TRS2, TRS3, PR Landlord and (subject to the delivery of the JM Lease (as hereinafter), the JM Landlord, collectively, “HPT” or the “HPT Parties”).

W I T N E S S E T H :

WHEREAS, InterContinental Hotels Group PLC (now known as InterContinental Hotels Limited) (“Old Guarantor”) entered into that certain Amended and Restated Consolidated Guaranty Agreement, dated as of February 16, 2005 (the “Existing Guaranty”), for the benefit of the HPT Parties; and

WHEREAS, Guarantor assumed all of the obligations of Old Guarantor under the Existing Guaranty pursuant to that certain Assumption, Termination and Amendment Agreement dated as of July 1, 2005 between Old Guarantor and Guarantor; and

WHEREAS, it is a condition precedent to TRS3 entering into the IHG5 Management Agreement (as hereinafter defined) and the consummation of certain other transactions contemplated by the Transaction Documents (as defined in the IHG5 Management Agreement) that the Guarantor enter into this Agreement; and

WHEREAS, the transactions contemplated by the Guaranteed Agreements (as hereinafter defined) and the Transaction Documents are of direct material benefit to the Guarantor;

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Certain Terms. Capitalized terms used but not defined herein have the meaning ascribed thereto in the IHG5 Management Agreement. The following terms as used in this Agreement shall have the meanings set

forth below:

“Accounting Principles” shall mean generally accepted accounting principles, as adopted in the United States of America, consistently applied or, if the Guarantor’s principal place of business is the United Kingdom, generally accepted accounting principles, as adopted in the United Kingdom, consistently applied.

“Base Guaranteed Amount” shall mean the sum of One Hundred Twenty Five Million Dollars ($125,000,000).

“Candlewood Hotels” shall mean the Hotels, as defined therein, under the Candlewood Management Agreement.

“Candlewood Management Agreement” shall mean that certain Management Agreement, dated as of October 27, 2003, between TRS1 and InterContinental Hotels Group Resources, Inc., as the same may be amended, modified, supplemented, or otherwise altered from time to time.

“Collateral Agency Agreement” shall mean a written agreement, in form and substance reasonably acceptable to HPT, among HPT, the Guarantor and the Collateral Agent pursuant to which the Collateral Agent shall agree to hold any cash delivered to such Collateral Agent pursuant to the terms of this Agreement as collateral agent on behalf of HPT, as the same may hereafter be amended, restated, modified, supplemented, or otherwise altered. Among other things, the Collateral Agency Agreement shall provide that (a) the Collateral Agent shall look solely to the Guarantor for any amounts owed to the Collateral Agent in connection with such agreement, (b) the Collateral Agent shall not offset any amount owed to the Collateral Agent against the cash delivered to it pursuant to the Collateral Agency Agreement and this Agreement, (c) the Collateral Agent shall hold such cash as trust funds and not commingle such cash with any assets of the Collateral Agent and (d) HPT shall be entitled to apply any cash collateral held by the Collateral Agent to the overdue obligations of the Guarantor hereunder in such order and at such times as HPT may determine in its sole judgment.

“Collateral Agent” shall mean a bank or other financial institution reasonably acceptable to HPT having a rating of not less than BBB-/Baa3 rating from the Rating Agencies, which bank or other financial institution is the collateral agent under the Collateral Agency Agreement as such collateral agent may be replaced in accordance with the terms of the Collateral Agency Agreement.

“Dollars” and “$” shall mean dollars in lawful currency of the United States of America.

“Excess JM Amounts” shall mean, with respect to any “Fiscal Year,” as defined therein, under the JM Lease, the excess, if any, of (i) the “Gross Revenues,” as defined therein, under the JM Lease, over (ii) (a) “Operating Costs,” “Minimum Rent,” and “Additional Rent”,

each as defined therein, under the JM Lease, (b) amounts deposited into the “FF&E Reserve” pursuant to Section 5.1.2 of the JM Lease, (c) an imputed management fee of five percent (5%), (d) amounts advanced by the JM Tenant under the JM Guaranty and (e) amounts advanced by the JM Tenant to replenish the Deposit.

“Guaranteed Agreements” shall mean, collectively, the Management Agreements,the PR Lease and, when it becomes effective, the JM Lease.

“Guaranteed Obligations” shall mean the payment to TRS1, TRS2, TRS3, PR Landlord, JM Landlord (once the JM Lease becomes effective) and Trust, as applicable, of: (a) all of the Owner’s First Priority as and when due under the Candlewood Management Agreement determined without respect to Gross Revenues thereunder or Operating Profits thereunder; (b) subject to, and in accordance with, the provisions of Section 10 hereof, all of the Owner’s First Priority as and when due under the IHG4 Management Agreement determined without respect to Gross Revenues thereunder or Operating Profits thereunder; (c) all of the Owner’s Priority as and when due under the Staybridge Management Agreement determined without respect to Gross Revenues thereunder or Operating Profits thereunder; (d) subject to, and in accordance with, the provisions of Section 10 hereof, all of the Owner’s First Priority as and when due under the IHG5 Management Agreement determined without respect to Gross Revenues thereunder or Operating Profits thereunder; (e) all of the Minimum Rent as and when due under the PR Lease; (f) all of the Minimum Rent as and when due under the JM Lease; and (g) any and all liquidated damages due to any of the HPT Parties under any of the Guaranteed Agreements.

“IHG4 Coverage Date” shall mean the date which is the day after the second consecutive calendar year for which the IHG4 Coverage Ratio is equal to or exceeds 1.3.

“IHG4 Coverage Ratio” shall mean for any period the quotient of (i) the sum of the numerators used in calculating both the PR Rent Coverage Ratio under this Agreement and the Priority Coverage Ratio under the IHG4 Management Agreement for such period, divided by (ii) the sum of the denominators used in calculating both the PR Rent Coverage Ratio under this Agreement and the Priority Coverage Ratio under the IHG4 Management Agreement for such period.

“IHG4 Guaranteed Obligations” shall mean the Guaranteed Obligations described under clauses (b), (e) and, to the extent relating to the IHG4 Management Agreement or the PR Lease, (g), of the definition of the term “Guaranteed Obligations” herein.

“IHG4 Management Agreement” shall mean that certain Amended and Restated Management Agreement, dated as of January 6, 2006, between TRS2 and IHG Management (Maryland) LLC and InterContinental Hotels Group (Canada), Inc. as the same may be amended, modified, supplemented, or otherwise altered from time to time.

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“IHG4 Severance Date” shall have the meaning given such term in Section 10 of this Agreement.

“IHG5 Coverage Date” shall mean the date which is the day after the second consecutive calendar year for which the IHG5 Priority Coverage Ratio has equaled or exceeded 1.3.

“IHG5 Guaranteed Obligations” shall mean the Guaranteed Obligations described under clauses (d), (f) and, to the extent relating to the IHG5 Management Agreement or the JM Lease, (g), of the definition of the term “Guaranteed Obligations” herein.

“IHG5 Management Agreement” shall mean that certain Management Agreement dated as January    , 2006 between TRS3 and IHG Management (Maryland) LLC, as the same may be amended, modified, supplemented, or otherwise altered.

“IHG5 Priority Coverage Ratio” shall mean, for any period, an amount equal to the quotient of (i) the excess of (a) the sum of the numerators used in calculating both the JM Rent Coverage Ratio under this Agreement and the Priority Coverage Ratio under the IHG5 Management Agreement for such period, over (b) the sum of (A) any advances made by TRS3 on account of Working Capital under the IHG5 Management Agreement for such period, and (B) amounts drawn on the Deposit (and not replenished) under the Deposit Agreement or this Guaranty for such period, (ii) divided by (ii) the sum of the Owner’s First Priority and the Owner’s Second Priority.

“IHG5 Severance Date” shall have the meaning given such term in Section 10 of this Agreement.

“JM Guaranty” shall mean that certain Guaranty Agreement to be executed and delivered in connection with the closing under the JM Stock Agreement, from JM Tenant to TRS3 and Trust, as the same may hereafter be amended, restated, modified, supplemented, or otherwise altered.

“JM Landlord” shall have the meaning given to the term “Landlord” in the JM Lease.

“JM Minimum Rent” shall have the meaning given to the term “Minimum Rent” in the JM Lease.

“JM Operating Costs” shall have the meaning given to the term “Operating Costs” in the JM Lease.

“JM Rent Coverage Ratio”  shall mean for any period, the quotient of (a) the excess of JM Total Hotel Sales over the sum of (i) JM Operating Costs (other than JM Minimum Rent and JM Additional Rent) for such period and (ii) an imputed reserve for Capital Expenses equal to six percent (6%) of JM Total Hotel Sales for such period, divided by (b) the sum of JM Minimum Rent for such period.

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“JM Stock Agreement” shall have the meaning given such term in the IHG5 Management Agreement.

“JM Tenant” shall mean the tenant under the JM Lease.

“JM Total Hotel Sales” shall have the meaning given to the term “Total Hotel Sales” in the JM Lease.

“Management Agreements” shall mean the Staybridge Management Agreement, the Candlewood Management Agreement, the IHG4 Management Agreement and the IHG5 Management Agreement, collectively.

“Managers” shall mean InterContinental Hotels Group Resources, Inc., IHG Management (Maryland) LLC and InterContinental Hotels Group (Canada), Inc., collectively.

“New Candlewood Guaranty” shall mean a Guaranty Agreement made by the Guarantor in favor of TRS1 and HPT and otherwise in the form attached hereto as Exhibit A.

“New Guaranties” shall mean the New Candlewood Guaranty and the New Staybridge Guaranty, collectively.

“New Staybridge Guaranty” shall mean a Guaranty Agreement made by the Guarantor in favor of TRS1 and HPT and otherwise in the form attached hereto as Exhibit B.

“Original Staybridge Guaranty” shall mean that certain Guaranty Agreement, dated as of July 1, 2003, made by Old Guarantor for the benefit of TRS1 in connection with the Staybridge Management Agreement, as amended by that certain First Amendment to Guaranty Agreement, dated as of September 18, 2003.

“Original Candlewood Guaranty” shall mean that certain Guaranty Agreement, dated as of October 27, 2003, made by Old Guarantor for the benefit of TRS2 in connection with the Candlewood Management Agreement.

“Other Severance Date” shall have the meaning given such term in Section 10 of this Agreement.

“Outstanding Balance” shall mean, from time to time, the Base Guaranteed Amount, less the excess of (i) the aggregate amount paid by the Guarantor under Section 3 hereof over (ii) the sum of the aggregate of (a) any amounts reimbursed to the Guarantor pursuant to the terms of the Management Agreements and (b) the aggregate amount of the sum of the Excess JM Amounts determined for each “Fiscal Year,” as defined therein, under the JM Lease from and after the effective date of the JM Lease, which amounts shall be determined, for each such Fiscal Year as the lesser of (i) the Excess JM Amount for such Fiscal Year or (ii) the excess of (A) the Base Guaranteed Amount over (B) the then Outstanding Balance as of the last day of such Fiscal Year.

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“PR Additional Rent” shall have the meaning given to the term “Additional Rent” in the PR Lease.

“PR Guaranty” shall mean that certain Guaranty Agreement dated as of February 16, 2005 from PR Tenant to TRS2 and Trust, as the same may hereafter be amended, restated, modified, supplemented, or otherwise altered.

“PR Operating Costs” shall have the meaning given to the term “Operating Costs” in the PR Lease.

“PR Rent Coverage Ratio”  shall mean for any period, the quotient of (a) the excess of PR Total Hotel Sales over the sum of (i) PR Operating Costs (other than PR Minimum Rent and PR Additional Rent) and (ii) an imputed reserve for Capital Expenses equal to five percent (5%) of Total Hotel Sales for such period, divided by (b) the sum of PR Minimum Rent for such period.

“PR Minimum Rent” shall have the meaning given to the term “Minimum Rent” in the PR Lease.

“PR Tenant” shall mean the tenant under the PR Lease.

“PR Total Hotel Sales” shall have the meaning given to the term “Total Hotel Sales” in the PR Lease.

“Provide Collateral” or “Provided Collateral” shall mean:

(a)delivery to HPT of (i) a Satisfactory Letter of Credit or (ii) cash in an amount equal to the then Outstanding Balance; or

(b)the deposit of cash equal to the then Outstanding Balance with the Collateral Agent to be held by the Collateral Agent in accordance with the Collateral Agency Agreement provided:(i) the Collateral Agency Agreement has been executed and delivered by the parties thereto; (ii) HPT has a perfected first priority security interest in any cash delivered to the Collateral Agent; (iii) HPT has received favorable opinions of counsel, in form and substance reasonably satisfactory to HPT, with respect to such perfected first priority interest, the valid existence and good standing of the other parties to the Collateral Agency Agreement, the due execution and delivery thereof by such other parties, the enforceability of the Collateral Agency Agreement against such parties, and that any cash held by the Collateral Agent pursuant to the Collateral Agency Agreement shall not be “property of the estate” of Collateral Agent should any event described in Sections 17.1(a), (b) or (c) of the IHG4 Management Agreement or the IHG5 Management Agreement occur with respect to the Collateral Agent; or

(c)delivery to HPT of other collateral satisfactory to HPT in its good faith discretion to secure the Guaranteed Obligations;

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provided, however, the Guarantor shall not be deemed to have Provided Collateral if at any time the Outstanding Balance exceeds the sum of (i) the then remaining balance drawable under the Satisfactory Letter of Credit or the balance of the cash deposited by the Guarantor hereunder, plus (ii) proceeds of any Satisfactory Letter of Credit or cash deposited hereunder, in either case, applied to the Guaranteed Obligations.

“Rating Agencies” shall mean, collectively, Standards & Poor’s Rating Services or its successors and Moody’s Investor Services, Inc. or its successors; provided, however, if the Rating Agencies (i) cease operations without successors or (ii) cease to issue credit ratings, “Rating Agencies” shall mean a nationally recognized organization periodically issuing ratings of the financial strength and/or credit of United States domestic and international banking institutions reasonably agreed to by HPT and the Guarantor.

“Reorganization” shall mean any merger, consolidation, reorganization, change of control or any transaction pursuant to which the Guarantor shall be or become a Subsidiary of any other Person.

“Satisfactory Letter of Credit” shall mean a clean irrevocable letter of credit in form and substance reasonably satisfactory to HPT in an amount equal to the Outstanding Balance issued by a bank with a credit rating of not less than A2/A (or, if after the date hereof the system of ratings used by the Rating Agencies changes in a material way, their then equivalents of such credit rating in HPT’s reasonable judgment) from the Rating Agencies, having an expiration date of not earlier than one year after the date on which it was issued and which permits for partial draws.

“Severance Date” shall mean, (i) with respect to the IHG4 Guaranteed Obligations, the IHG4 Severance Date, (ii) with respect to the IHG5 Guaranteed Obligations, the IHG5 Severance Date, and (iii) with respect to the Guaranteed Obligations relating to the Staybridge and Candlewood Hotels, the Other Severance Date.

“Staybridge and Candlewood Hotels” shall mean, collectively, the Staybridge Hotels and the Candlewood Hotels.

“Staybridge Hotels” shall mean the Hotels, as defined therein, under the Staybridge Management Agreement.

“Staybridge Management Agreement” shall mean that certain Management Agreement, dated as of July 1, 2003, between TRS1 and InterContinental Hotels Group Resources, Inc., as amended by that certain First Amendment to Management Agreement dated as of September 18, 2003, that certain Second Amendment to Management Agreement dated as of March, 2004, that certain Third Amendment to Management Agreement dated as of February 16, 2005 and that certain Fourth Amendment to Management Agreement dated as of January 6, 2006, as the same may be further amended, modified, supplemented, or otherwise altered from time to time.

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“Staybridge Priority Coverage Ratio” shall mean, for any period, the ratio of (a) the excess of Gross Revenue under the Staybridge Management Agreement for such period over the sum of the amounts distributed or applied for such period pursuant to Sections 10.1(a), (b) (determined as though the Reserve Percentage thereunder for the Expansion Hotels (as defined in the Staybridge Management Agreement) was at all times five percent (5%)), (e), (g), (h), (i), (k) and (l) of the Staybridge Management Agreement, to (b) the sum for such period of Owner’s Priority under that Agreement and Owner’s Percentage Priority under that Agreement.

“Substitute Guarantor” shall mean a Person who assumes the Guarantor’s obligations hereunder in accordance with the terms of Section 2.7 below and is either (a) a Person who satisfies the Rating Agencies’ requirements for a single purpose bankruptcy remote entity who has Provided Collateral or (b) a Person(s) with (i) a tangible net worth determined in accordance with the Accounting Principles of not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor).

2.Representations and Covenants. The Guarantor represents, warrants, covenants and agrees that:

2.1Validity of Agreement. The Guarantor has duly and validly executed and delivered this Agreement; this Agreement constitutes the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors; and the execution, delivery and performance of this Agreement have been duly authorized by all requisite action of the Guarantor and such execution, delivery and performance by the Guarantor will not result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of the property or assets of the Guarantor pursuant to the terms of, any indenture, mortgage, deed of trust, note, other evidence of indebtedness, agreement or other instrument to which the Guarantor is a party or by which the Guarantor or any property or assets of the Guarantor is bound, or violate any provision of law applicable to the Guarantor, or any order, writ, injunction, judgment or decree of any court applicable to the Guarantor or any order or other public regulation of any governmental commission, bureau or administrative agency applicable to the Guarantor.

2.2Payment of Expenses. The Guarantor agrees, as principal obligor and not as guarantor only, to pay to HPT forthwith, upon demand, in immediately available Federal funds, all costs and expenses (including court costs and reasonable legal expenses) incurred or expended by HPT in connection with the enforcement of this Agreement, together with

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interest at the Interest Rate on amounts recoverable under this Agreement from the time such amounts become due until payment.

2.3Reports. The Guarantor shall timely deliver to HPT the Consolidated Financials required under the Guaranteed Agreements and otherwise comply with the terms of the Guaranteed Agreements applicable to it.

2.4Financial Condition of Guarantor; Status of Guarantor. So long as the Guarantor’s obligations under Section 3 below are outstanding, unless the Guarantor shall have Provided Collateral to secure its obligations hereunder:

(a)The Guarantor shall at all times maintain a tangible net worth determined in accordance with the Accounting Principles in an amount not less than Five Hundred Million Dollars ($500,000,000) or if there has been a Reorganization, or if the Guarantor is not the originally named Guarantor, Seven Hundred Fifty Million Dollars ($750,000,000); and

(b)The Guarantor shall not engage in any Reorganization unless following such Reorganization it has (i) a tangible net worth determined in accordance with the Accounting Principles in an amount not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars ($100,000,000) (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor).

2.5Security.

(a)Upon the termination of the Guarantor’s obligations under Section 3 or if the Outstanding Balance equals zero dollars ($0), HPT will return to the Guarantor any Satisfactory Letter of Credit previously delivered to HPT or any unapplied cash collateral then being held by HPT hereunder and shall direct the Collateral Agent to return any cash being held by it under the Collateral Agency Agreement to the Guarantor.

(b)HPT shall be entitled to draw upon any Satisfactory Letter of Credit delivered to it (i) for the full amount thereof if at any time there is less than thirty (30) days until the expiry date of such Satisfactory Letter of Credit; (ii) for the full amount thereof if the bank that issued such Satisfactory Letter of Credit shall not have a credit rating of at least A/A2 (or, if after the date hereof the system of ratings used by the Rating Agencies changes in a material way, their then equivalents in HPT’s reasonable judgment) from the Rating Agencies and such satisfactory Letter of Credit shall not have been replaced within thirty (30) days with a new Satisfactory Letter of Credit delivered to HPT; or (iii) to the extent and in the amounts then due and payable hereunder, if the Guarantor shall fail to pay or perform any of its obligations under this Agreement in accordance with the terms hereof.

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(c)HPT shall be entitled to apply any cash collateral held by it or the Collateral Agent to the overdue obligations of the Guarantor hereunder in such order and at such times as HPT may determine in its sole judgment. Any cash collateral held by HPT shall not be commingled with its other funds, and shall be invested, at the Guarantor’s risk, in interest bearing investments reasonably acceptable to the Guarantor. Any interest on such cash collateral, and any losses in such investments, shall belong to IHG.

2.6Legal Existence. The Guarantor shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. The Guarantor has appointed attorneys Alston & Bird LLP, having an address at 1201 West Peachtree Street, Atlanta, Georgia 30309-3424, Attn:  Managing Partner as its agent for service of process. The Guarantor acknowledges and agrees that service of process on such agent shall constitute service of process on Guarantor with respect to any and all claims hereunder, under the Guaranteed Agreements or under any Transaction Document.

2.7Substitute Guarantor. The then Guarantor (the “Departing Guarantor”) shall be released from obligations under Section 3 hereof on the following terms and conditions:

(a)a Substitute Guarantor shall assume pursuant to a written instrument satisfactory to HPT all of the Guarantor’s obligations hereunder; and

(b)HPT shall receive an opinion of counsel satisfactory to HPT with respect to, among other things, the existence and good standing of the Substitute Guarantor and the due execution, delivery and enforceability of such assumption.

Upon the satisfaction of the foregoing conditions and the expiration of all applicable preference or similar periods, HPT shall deliver a release to the Departing Guarantor of its obligations under Section 3 hereof and the Substitute Guarantor shall be deemed the “Guarantor” hereunder. Further, if the Substitute Guarantor has Provided Collateral or has (i) a tangible net worth determined in accordance with the Accounting Principles of not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor), HPT shall return to the Departing Guarantor any letter of credit or cash delivered by the Departing Guarantor and held by HPT hereunder and shall direct the Collateral Agent to return to the Departing Guarantor any cash delivered by the Departing Guarantor and held by such Collateral Agent pursuant to the terms of the Collateral Agency Agreement.

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3.Guarantee.

(a)The Guarantor hereby unconditionally guarantees that the Guaranteed Obligations which become due and payable shall be paid in full when due and payable subject to any applicable cure periods, whether upon demand, at the stated or accelerated maturity thereof or upon any mandatory or voluntary prepayment pursuant to any Guaranteed Agreement, or otherwise.

(b)This guarantee is a guarantee of payment and not of collectibility and is absolute and in no way conditional or contingent. In case any part of the Guaranteed Obligations shall not have been paid when due and payable or performed at the time performance is required, subject to any applicable cure periods, the Guarantor shall, pay or cause to be paid to HPT the amount thereof as is then due and payable and unpaid (including interest and other charges, if any, due thereon through the date of payment in accordance with the applicable provisions of the Transaction Documents) or perform or cause to be performed such obligations in accordance with the Transaction Documents. Simultaneously with the giving of any notice of default to the Managers or PR Tenant under the Guaranteed Agreements, TRS1, TRS2, TRS3, PR Landlord or JM Landlord, as applicable, shall give a copy of such notice to the Guarantor. TRS1, TRS2, TRS3, PR Landlord or JM Landlord, as applicable, shall accept any cure of such default by the Guarantor provided such cure is completed within the applicable cure period under the applicable Guaranteed Agreement.

4.Unenforceability of Guaranteed Obligations, Etc. If the Managers, PR Tenant or (when the JM Lease becomes effective) JM Tenant are for any reason under no legal obligation to discharge any of the Guaranteed Obligations, or if any other moneys included in the Guaranteed Obligations have become unrecoverable from the Managers, PR Tenant or (when the JM Lease becomes effective) JM Tenant by operation of law or for any other reason, including, without limitation, the invalidity or irregularity in whole or in part of any Guaranteed Obligation or of any Guaranteed Agreement or any limitation on the liability of the Managers, PR Tenant or (when the JM Lease becomes effective) JM Tenant thereunder or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever, the guarantees contained in this Agreement shall nevertheless remain in full force and effect in accordance with the terms set forth herein and shall be binding upon the Guarantor to the same extent as if the Guarantor at all times had been the principal debtor and obligor on all such Guaranteed Obligations.

5.Additional Guarantees. This Agreement shall be in addition to any other guarantee or other security for the Guaranteed Obligations and it shall not be prejudiced or rendered unenforceable by the invalidity of any such other guarantee or security or by any waiver, amendment, release or modification thereof.

6.Consents and Waivers, Etc. The Guarantor hereby acknowledges receipt of correct and complete copies of each of the Guaranteed Agreements

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and consents to all of the terms and provisions thereof, as the same may be from time to time hereafter amended or changed in accordance therewith, and waives, to the extent the Guarantor lawfully may do so, (a) presentment, demand for payment, and protest of nonpayment, of any of the Guaranteed Obligations, (b) notice of acceptance of this Agreement and of diligence, presentment, demand and protest, (c) notice of any default hereunder and any default, breach or nonperformance under the Guaranteed Agreements or a Manager Event of Default or Manager Default under any Management Agreement or an Event of Default under the PR Lease or JM Lease except as expressly provided in Section 3, (d) notice of the terms, time and place of any private or public sale of collateral held as security for the Guaranteed Obligations, (e) demand for performance or observance of, and any enforcement of any provision of, or any pursuit or exhaustion of rights or remedies against the Managers, or PR Tenant, JM Tenant or any other guarantor of the Guaranteed Obligations, under or pursuant to the Guaranteed Agreements, or any agreement directly or indirectly relating thereto and any requirements of diligence or promptness on the part of the holders of the Guaranteed Obligations in connection therewith, and (f) any and all demands and notices of every kind and description with respect to the foregoing or which may be required to be given by any statute or rule of law.

7.No Impairment, Etc. The obligations, covenants, agreements and duties of the Guarantor under this Agreement shall not be affected or impaired by any assignment or transfer in whole or in part of any of the Guaranteed Obligations without notice to the Guarantor, or any waiver by HPT or any holder of any of the Guaranteed Obligations or by the holders of all of the Guaranteed Obligations of the performance or observance by the Managers, PR Tenant, JM Tenant or any other guarantor of any of the agreements, covenants, terms or conditions contained in the Guaranteed Obligations or the Guaranteed Agreements or any indulgence in or the extension of the time for payment by the Managers, PR Tenant, JM Tenant or any other guarantor of any amounts payable under or in connection with the Guaranteed Obligations or the Guaranteed Agreements or any other instrument or agreement relating to the Guaranteed Obligations or of the time for performance by the Managers, PR Tenant, JM Tenant or any other guarantor of any other obligations under or arising out of any of the foregoing or the extension or renewal thereof, or the modification or amendment made with the consent of the Guarantor of any duty, agreement or obligation of the Managers, PR Tenant or any other guarantor set forth in any of the foregoing, or the voluntary or involuntary sale or other disposition of all or substantially all the assets of the Managers, PR Tenant, JM Tenant or any other guarantor or insolvency, bankruptcy, or other similar proceedings affecting the Managers, PR Tenant, JM Tenant or any other guarantor or any assets of the Managers, PR Tenant, JM Tenant or any such other guarantor, or the release or discharge of the Managers, PR Tenant, JM Tenant or any such other guarantor from the performance or observance of any agreement, covenant, term or condition contained in any of the foregoing without the consent of the holders of the Guaranteed Obligations by operation of law.

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8.Reimbursement, Subrogation, Etc. The Guarantor hereby covenants and agrees that the Guarantor will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against the Managers, PR Tenant or any other person with respect to the Guaranteed Obligations prior to the irrevocable payment in full of all amounts then due and owing but unpaid under the Guaranteed Agreements. Until the Guaranteed Obligations have been satisfied in full, the Guarantor shall not have any right of subrogation, and the Guarantor waives any defense it may have based upon any election of remedies by HPT which destroys the Guarantor’s subrogation rights or the Guarantor’s rights to proceed against the Managers or PR Tenant for reimbursement, including, without limitation, any loss of rights the Guarantor may suffer by reason of any rights, powers or remedies of the Managers or PR Tenant in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging the indebtedness to HPT. Until all obligations of the Managers and PR Tenant pursuant to the Guaranteed Agreements shall have been irrevocably paid and satisfied in full, the Guarantor waives any right to enforce any remedy which HPT now has or may in the future have against the Managers, PR Tenant, any other guarantor or any other person and any benefit of, or any right to participate in, any security whatsoever now or in the future held by HPT. Nothing contained in this Section 8 shall limit any of Guarantor’s rights under the Management Agreements.

9.Defeasance; Guaranty Limitations. The Guarantor’s obligations under Section 3 shall terminate upon the date on which the Guaranteed Obligations have been paid and performed in full and all other obligations of the Guarantor to HPT under this Agreement have been irrevocably satisfied in full; provided, however, certain of the Guarantor’s obligations under Section 3 shall be subject to early termination subject to, and upon, the terms and conditions set forth in Section 10 hereof; provided further, however, if at any time, all or any part of any payment applied on account of the Guaranteed Obligations is or must be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Managers, PR Tenant or JM Tenant), this Agreement, to the extent such payment is or must be rescinded or returned, shall be deemed to have continued in existence notwithstanding any such termination. Notwithstanding anything contained in this Agreement to the contrary, in no event shall the Guarantor’s liability under Section 3 exceed the Outstanding Balance.

10.Severance. Subject, in each case, to the second proviso contained in Section 9 above, the Guarantor’s obligations under this Agreement shall terminate as follows:

10.1IHG4. (a)  If (i) the IHG4 Coverage Date shall have occurred, and (ii) the Guarantor is not then in default of its obligations under this Agreement, then, on such date (the “IHG4 Severance Date”), the Guarantor’s obligations under this Agreement shall terminate with respect to the IHG4 Guaranteed Obligations.

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10.2IHG5. (a)  If (i) the IHG5 Coverage Date shall have occurred, and (ii) the Guarantor is not then in default of its obligations under this Agreement, then, on such date (the “IHG5 Severance Date”), the Guarantor’s obligations under this Agreement shall terminate with respect to the IHG5 Guaranteed Obligations.

10.3Candlewood and Staybridge. (a)  If (i) the IHG4 Coverage Severance Date shall have occurred, (ii) the IHG5 Coverage Severance Date shall have occurred, (iii) the Guarantor is not then in default of its obligations under this Agreement, and (iv) the Guarantor shall have delivered to HPT and TRS1 executed counterparts of the New Guaranties and an opinion of counsel satisfactory to Trust with respect to, among other things, the existence and good standing of the Guarantor and the due execution, delivery and enforceability of the New Guaranties then, on the date on which the New Guaranties and such opinion are delivered (the “Other Severance Date”), the Guarantor’s obligations under this Agreement shall terminate.

If any Substitute Guarantor has succeeded to the interests of the Guarantor named herein, then the termination of such Substitute Guarantor’s obligations under this Agreement shall be further conditioned upon such Substitute Guarantor satisfying the requirements with respect to a Substitute Guarantor under each of the New Guaranties, including, without limitation, the obligation to Provide Collateral under each of the New Guaranties (if applicable). Notwithstanding the foregoing, the termination of the Guarantor’s obligations under this Agreement shall not diminish, impair or otherwise affect the Guarantor’s obligations under the New Guaranties.

11.Notices. (a)  Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Agreement shall be deemed adequately given if in writing and the same shall be delivered either by hand, by telecopier with written acknowledgment of receipt (provided a copy thereof is sent by Federal Express or similar expedited commercial carrier for delivery on the next business day), or Federal Express or similar expedited commercial carrier, addressed to the recipient of the notice, postpaid and registered or certified with return receipt requested (if by mail), or with all freight charges prepaid (if by Federal Express or similar carrier).

(b)  All notices required or permitted to be sent hereunder shall be deemed to have been given for all purposes of this Agreement upon the date of acknowledged receipt, in the case of a notice by telecopier, and, in all other cases, upon the date of receipt or refusal, except that whenever under this Agreement a notice is either received on a day which is not a Business Dayor is required to be delivered on or before a specific day which is not a Business Day, the day of receipt or required delivery shall automatically be extended to the next Business Day.

(c)  All such notices shall be addressed,

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if to HPT to:

c/o Hospitality Properties Trust

400 Centre Street

Newton, Massachusetts 02458

Attn:  Mr. John G. Murray

[Telecopier No. (617) 969-5730]

with a copy to:

Sullivan & Worcester LLP

One Post Office Square

Boston, Massachusetts 02109

Attn:  Nancy S. Grodberg, Esq.

[Telecopier No. (617) 338-2880]

if to the Guarantor to:

Intercontinental Hotels Group PLC

67 Alma Road

Windsor

Berkshire SL4 3HD

ENGLAND

Attn: Company Secretary

Telecopier No. +44 1753 410101

with a copy to:

Intercontinental Hotels Resources Group, Inc.

Three Ravinia Drive

Suite 100

Atlanta, Georgia 30346

Attn:  Vice President, Asset Management

[Telecopier No. 770-604-5340]

(d)By notice given as herein provided, the parties hereto and their respective successors and assigns shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses effective upon receipt by the other parties of such notice and each shall have the right to specify as its address any other address within the United States of America.

12.Successors and Assigns. Whenever in this Agreement, any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, including without limitation the holders, from time to time, of the Guaranteed Obligations; and all representations, warranties, covenants and agreements by or on behalf of the Guarantor which are contained in this Agreement shall inure to the benefit of HPT’s successors and assigns, including, without limitation, such holders, whether so expressed or not.

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13.Applicable Law. Except as to matters regarding the internal affairs of HPT and issues of or limitations on any personal liability of the shareholders and trustees of HPT for obligations of HPT, as to which the laws of the State of Maryland shall govern, this Agreement and any other instruments executed and delivered to evidence, complete or perfect the transactions contemplated hereby shall be interpreted, construed, applied and enforced in accordance with the laws of New York applicable to contracts between residents of New York which are to be performed entirely within New York, regardless of (i) where any such instrument is executed or delivered; or (ii) where any payment or other performance required by any such instrument is made or required to be made; or (iii) where any breach of any provision of any such instrument occurs, or any cause of action otherwise accrues; or (iv) where any action or other proceeding is instituted or pending; or (v) the nationality, citizenship, domicile, principal place of business, or jurisdiction of organization or domestication of any party; or (vi) whether the laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction other than New York; or (vii) any combination of the foregoing.

All actions and proceedings arising out of or in any way relating to this Agreement shall be brought, heard, and determined exclusively in an otherwise appropriate federal or state court located within the State of New York. Guarantor hereby (i) submits to the exclusive jurisdiction of any New York federal or state court of otherwise competent jurisdiction for the purpose of any action or proceeding arising out of or relating to this Agreement and (ii) voluntarily and irrevocably waives, and agrees not to assert by way of motion, defense, or otherwise in any such action or proceeding, any claim or defense that it is not personally subject to the jurisdiction of such a court, that such a court lacks personal jurisdiction over Guarantor or the matter, that the action or proceeding has been brought in an inconvenient or improper forum, that the venue of the action or proceeding is improper, or that this Agreement may not be enforced in or by such a court. To the maximum extent permitted by applicable law, Guarantor consents to service of process by registered mail, return receipt requested, or by any other manner provided by law.

To the maximum extent permitted by applicable law, each of the parties hereto waives its rights to trial by jury with respect to this Agreement or any matter arising in connection herewith.

14.Modification of Agreement. No modification or waiver of any provision of this Agreement, nor any consent to any departure by the Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by HPT, and such modification, waiver or consent shall be effective only in the specific instances and for the purpose for which given. No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in the same, similar or other circumstances.

15.Waiver of Rights by HPT. Neither any failure nor any delay on HPT’s part in exercising any right, power or privilege under this Agreement

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shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise, or the exercise of any other right, power or privilege.

16.Severability. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, but this Agreement shall be reformed and construed and enforced to the maximum extent permitted by applicable law.

17.Entire Contract. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof.

18.Headings; Counterparts. Headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument, and in pleading or proving any provision of this Agreement, it shall not be necessary to produce more than one of such counterparts.

19.Remedies Cumulative. No remedy herein conferred upon HPT is intended to be exclusive of any other remedy, and subject to the limitations set forth in Section 9 above, each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

20.Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING TRUST, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT, AND THE GUARANTOR HEREBY AGREES THAT, THE NAME “HOSPITALITY PROPERTIES TRUST” REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, TRUST. ALL PERSONS DEALING WITH TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

21.Effective Date. This Agreement shall be of no force or effect unless and until the Effective Date occurs.

22.PR Guaranty Obligations. Guarantor acknowledges and agrees that at any time there is any amount due and otherwise payable under the PR Guaranty, HPT shall be entitled to treat any payment by Guarantor as a payment by the PR Tenant under the PR Guaranty and to the extent HPT

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so elects such payment shall not result in a reduction in the Outstanding Balance.

23.Restatement. This Agreement supercedes, amends and restates in its entirety the Existing Guaranty.

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WITNESS the execution hereof under seal as of the date above first written.

INTERCONTINENTAL HOTELS GROUP PLC
By:		/s/ Richard Solomons
		Its:		Director
By:	/s/ Stevan Porter
	Its:		Director

[Signatures continue on next page.]

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ACKNOWLEDGED AND AGREED:
HPT TRS IHG-1, INC.
By:			/s/ John G. Murray
			John G. Murray
			Vice President
HPT TRS IHG-2, INC.
By:		/s/ John G. Murray
		John G. Murray
		Vice President
HPT TRS IHG-3, INC.
By:	/s/ John G. Murray
	John G. Murray
	Vice President
HPT IHG PR, INC.
By:		/s/ John G. Murray
		John G. Murray
		President
HOSPITALITY PROPERTIES TRUST
By:	/s/ John G. Murray
	John G. Murray
	President

EX-10.28

Exhibit 10.28

EXHIBIT A

NEW CANDLEWOOD GUARANTY

GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT (this “Agreement”) is made and given as of                      , 20    , by INTERCONTINENTAL HOTELS GROUP PLC, a corporation organized and existing under the laws of England and Wales (the “Guarantor”), for the benefit of HPT TRS IHG-1, INC., a Maryland corporation (together with its successors and assigns, the “Tenant”), and HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust (together with its successors and assigns, “Trust”; and Trust together with the Tenant, “HPT”).

W I T N E S S E T H :

WHEREAS, on January     , 2006, the Guarantor delivered to HPT that certain Second Amended and Restated Consolidated Guaranty Agreement (the “Consolidated Guaranty”); and

WHEREAS, both the IHG4 Coverage Date and the IHG5 Coverage Date (as such terms are defined in the Consolidated Guaranty) have occurred and the Guarantor wishes to terminate its obligations under the Consolidated Guaranty in accordance with Section 10 of the Consolidated Guaranty; and

WHEREAS, Section 10 of the Consolidated Guaranty requires, among other things, that the Guarantor deliver this Guaranty Agreement to HPT in order to terminate its obligations under the Consolidated Guaranty as aforesaid; and

WHEREAS, the termination of its obligations under the Consolidated Guaranty as aforesaid constitute a direct material benefit to the Guarantor;

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Certain Terms. Capitalized terms used and not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Management Agreement (as hereinafter defined). The following terms as used in this Agreement shall have the meanings set forth below:

“Accounting Principles” shall mean generally accepted accounting principles, as adopted in the United States of America, consistently applied or, if the Guarantor’s principal place of business is the United Kingdom, generally accepted accounting principles, as adopted in the United Kingdom, consistently applied.

“Collateral Agency Agreement” shall mean a written agreement, in form and substance reasonably acceptable to HPT, among HPT, the Guarantor and the Collateral Agent pursuant to which the Collateral Agent shall agree to hold any cash delivered to such Collateral Agent pursuant to the terms of this Agreement as collateral agent on behalf of HPT, as the same may be amended, restated, supplemented or otherwise modified from time to time with the consent of the parties thereto. Among other things, the Collateral Agency Agreement shall provide that (a) the Collateral Agent shall look solely to the Guarantor for any amounts owed to the Collateral Agent in connection with such agreement, (b) the Collateral Agent shall not offset any amount owed to the Collateral Agent against the cash delivered to it pursuant to the Collateral Agency Agreement and this Agreement, (c) the Collateral Agent shall hold such cash as trust funds and not commingle such cash with any assets of the Collateral Agent and (d) HPT shall be entitled to apply any cash collateral held by the Collateral Agent to the overdue obligations of the Guarantor hereunder in such order and at such times as HPT may determine in its sole judgment.

“Collateral Agent” shall mean a bank or other financial institution reasonably acceptable to HPT having a rating of not less than BBB-/Baa3 rating from the Rating Agencies, which bank or other financial institution is the collateral agent under the Collateral Agency Agreement as such collateral agent may be replaced in accordance with the terms of the Collateral Agency Agreement.

“Coverage Date” shall mean the date which is the day after the second (2^nd) consecutive calendar year for which the Priority Coverage Ratio is equal to or exceeds 1.3.

“Guaranteed Obligations” shall mean the payment to Tenant of (a) all of the Owner’s First Priority as and when due under the Management Agreement determined without respect to Gross Revenue or Operating Profits and (b) any and all liquidated damages due to Tenant under the Management Agreement.

“Management Agreement” shall mean [that certain Amended and Restated Management Agreement, dated as of January     , 2005, between TRS1 and Manager] with respect to certain hotels being

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operated under the “Candlewood” brand] [that certain Management Agreement, dated as of October 27, 2003, between TRS1 and Manager], as the same may be amended, modified, supplemented, or otherwise altered from time to time.

“Manager” shall mean Intercontinental Hotels Group Resources, Inc.

“Outstanding Balance” shall mean, from time to time, Fifty Million Dollars ($50,000,000), less the excess of the aggregate amount paid by the Guarantor under Section 3 hereof over the aggregate of any amounts reimbursed to the Guarantor pursuant to the terms of the Management Agreement.

“Provide Collateral” or “Provided Collateral” shall mean:

(a)delivery to HPT of (i) a Satisfactory Letter of Credit or (ii) cash in an amount equal to the then Outstanding Balance; or

(b)the deposit of cash equal to the then Outstanding Balance with the Collateral Agent to be held by the Collateral Agent in accordance with the Collateral Agency Agreement provided:(i) the Collateral Agency Agreement has been executed and delivered by the parties thereto; (ii) HPT has a perfected first priority security interest in any cash delivered to the Collateral Agent; (iii) HPT has received favorable opinions of counsel, in form and substance reasonably satisfactory to HPT, with respect to such perfected first priority interest, the valid existence and good standing of the other parties to the Collateral Agency Agreement, the due execution and delivery thereof by such other parties, the enforceability of the Collateral Agency Agreement against such parties, and that any cash held by the Collateral Agent pursuant to the Collateral Agency Agreement shall not be “property of the estate” of Collateral Agent should any event described in Sections 17.1(a), (b) or (c) of the Management Agreement shall occur with respect to the Collateral Agent; or

(c)delivery to HPT of other collateral satisfactory to HPT in its good faith discretion to secure the Guaranteed Obligations;

provided, however, the Guarantor shall not be deemed to have Provided Collateral if at any time the Outstanding Balance exceeds the sum of (i) the then remaining balance drawable under the Satisfactory Letter of Credit or the balance of the cash deposited by the Guarantor hereunder, plus (ii) proceeds of any

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Satisfactory Letter of Credit or cash deposited hereunder, in either case, applied to the Guaranteed Obligations.

“Rating Agencies” shall mean, collectively, Standard’s & Poor’s Rating Services or its successor and Moody’s Investor Services, Inc. or its successors; provided, however, if the Rating Agencies (i) cease operations without successors or (ii) cease to issue credit ratings, “Rating Agencies” shall mean a nationally recognized organization periodically issuing ratings of the financial strength and/or credit of United States domestic and international banking institutions reasonably agreed to by HPT and the Guarantor.

“Reorganization” shall mean any merger, consolidation, reorganization, change of control or any transaction pursuant to which the Guarantor shall be or become a Subsidiary of any other Person.

“Satisfactory Letter of Credit” shall mean a clean irrevocable letter of credit in form and substance reasonably satisfactory to HPT in an amount equal to the Outstanding Balance issued by a bank with a credit rating of not less than A2/A (or, if after the date hereof the system of ratings used by the Rating Agencies changes in a material way, their then equivalents of such credit rating in HPT’s reasonable judgment) from the Rating Agencies, having an expiration date of not earlier than one year after the date on which it was issued and which permits for partial draws.

“Substitute Guarantor” shall mean a Person who assumes the Guarantor’s obligations hereunder in accordance with the terms of Section 2.7 below and is either (a) a Person who satisfies the Rating Agencies’ requirements for a single purpose bankruptcy remote entity who has Provided Collateral or (b) a Person(s) with (i) a tangible net worth determined in accordance with the Accounting Principles not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor).

2.Representations and Covenants. The Guarantor represents, warrants, covenants and agrees that:

2.1Validity of Agreement. The Guarantor has duly and validly executed and delivered this Agreement; this Agreement constitutes the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance

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with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors; and the execution, delivery and performance of this Agreement have been duly authorized by all requisite action of the Guarantor and such execution, delivery and performance by the Guarantor will not result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of the property or assets of the Guarantor pursuant to the terms of, any indenture, mortgage, deed of trust, note, other evidence of indebtedness, agreement or other instrument to which the Guarantor is a party or by which the Guarantor or any property or assets of the Guarantor is bound, or violate any provision of law applicable to the Guarantor, or any order, writ, injunction, judgement or decree of any court applicable to the Guarantor or any order or other public regulation of any governmental commission, bureau or administrative agency applicable to the Guarantor.

2.2Payment of Expenses. The Guarantor agrees, as principal obligor and not as guarantor only, to pay to HPT forthwith, upon demand, in immediately available Federal funds, all costs and expenses (including court costs and reasonable legal expenses) incurred or expended by HPT in connection with the enforcement of this Agreement, together with interest at the Interest Rate on amounts recoverable under this Agreement from the time such amounts become due until payment.

2.3Reports. The Guarantor shall timely deliver to HPT the Consolidated Financials required under the Management Agreement and otherwise comply with the terms of the Management Agreement applicable to it.

2.4Financial Condition of Guarantor; Status of Guarantor. So long as the Guarantor’s obligations under Section 3 below are outstanding, unless the Guarantor shall have Provided Collateral to secure its obligations hereunder:

(a)The Guarantor shall at all times maintain a tangible net worth determined in accordance with the Accounting Principles in an amount not less than Five Hundred Million Dollars ($500,000,000) or if there has been a Reorganization, or if the Guarantor is not the originally named Guarantor, Seven Hundred Fifty Million Dollars ($750,000,000); and

(b)The Guarantor shall not engage in any Reorganization unless following such Reorganization it has (i) a tangible net worth determined in accordance with the Accounting Principles in

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an amount not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars ($100,000,000) (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor).

2.5Security. Upon the termination of the Guarantor’s obligations under Section 3 or if the excess of aggregate amount paid by the Guarantor under Section 3 over the aggregate of any amounts reimbursed to it pursuant to the terms of the Management Agreement equals not less than Fifty Million dollars ($50,000,000), HPT will return to the Guarantor any Satisfactory Letter of Credit previously delivered to HPT or any unapplied cash collateral then being held by HPT hereunder and shall direct the Collateral Agent to return any cash being held by it under the Collateral Agency Agreement to the Guarantor. HPT shall be entitled to draw upon any Satisfactory Letter of Credit delivered to it (a) for the full amount thereof if at any time there is less than thirty (30) days until the expiry date of such Satisfactory Letter of Credit; (b) for the full amount thereof if the bank that issued such Satisfactory Letter of Credit shall not have a credit rating of at least A/A2 (or, if after the date hereof the system of ratings used by the Rating Agencies changes in a material way, their then equivalents in HPT’s reasonable judgment) from the Rating Agencies and such satisfactory Letter of Credit shall not have been replaced within thirty (30) days with a new Satisfactory Letter of Credit delivered to HPT; or (c) to the extent and in the amounts then due and payable hereunder, if the Guarantor shall fail to pay or perform any of its obligations under this Guaranty in accordance with the terms hereof. HPT shall be entitled to apply any cash collateral held by it or the Collateral Agent to the overdue obligations of the Guarantor hereunder in such order and at such times as HPT may determine in its sole judgment. Any cash collateral held by HPT shall not be commingled with its other funds, and shall be invested, at the Guarantor’s risk, in interest bearing investments reasonably acceptable to the Guarantor. Any interest on such cash collateral, and any losses in such investments, shall belong to IHG.

2.6Legal Existence. The Guarantor shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. The Guarantor has appointed attorneys Alston & Bird LLP, having an address at 1201 West Peachtree Street, Atlanta, Georgia 30309-3424, Attn:  Managing Partner as its agent for service of process. The Guarantor acknowledges and agrees that service of process on

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such agent shall constitute service of process on Guarantor with respect to any and all claims hereunder or under any other Transaction Document.

2.7Substitute Guarantor. The then Guarantor (the “Departing Guarantor”) shall be released from obligations under Section 3 hereof on the following terms and conditions:

(a)a Substitute Guarantor shall assume pursuant to a written instrument satisfactory to HPT all of the Guarantor’s obligations hereunder; and

(b)HPT shall receive an opinion of counsel satisfactory to HPT with respect to, among other things, the existence and good standing of the Substitute Guarantor and the due execution, delivery and enforceability of such assumption.

Upon the satisfaction of the foregoing conditions and the expiration of all applicable preference or similar periods, HPT shall deliver a release to the Departing Guarantor of its obligations hereunder and the Substitute Guarantor shall be deemed the “Guarantor” hereunder. Further, if the Substitute Guarantor has Provided Collateral or has (i) a tangible net worth determined in accordance with the Accounting Principles of not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor), HPT shall return to the Departing Guarantor any letter of credit or cash delivered by the Departing Guarantor and held by HPT hereunder and shall direct the Collateral Agent to return to the Departing Guarantor any cash delivered by the Departing Guarantor and held by such Collateral Agent pursuant to the terms of the Collateral Agency Agreement.

3.Guarantee.

(a)The Guarantor hereby unconditionally guarantees that the Guaranteed Obligations which become due and payable during the term of the Management Agreement shall be paid in full when due and payable subject to any applicable cure periods, whether upon demand, at the stated or accelerated maturity thereof or upon any mandatory or voluntary prepayment pursuant to any Transaction Document, or otherwise.

(b)This guarantee is a guarantee of payment and not of collectibility and is absolute and in no way conditional or contingent. In case any part of the Guaranteed Obligations

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shall not have been paid when due and payable or performed at the time performance is required, subject to any applicable cure periods, the Guarantor shall, pay or cause to be paid to HPT the amount thereof as is then due and payable and unpaid (including interest and other charges, if any, due thereon through the date of payment in accordance with the applicable provisions of the Transaction Documents) or perform or cause to be performed such obligations in accordance with the Transaction Documents. Simultaneously with the giving of any notice of default to the Manager under the Management Agreement, Tenant shall give a copy of such notice to the Guarantor. Tenant shall accept any cure of such default by the Guarantor provided such cure is completed within the applicable cure period under the Management Agreement.

4.Unenforceability of Guaranteed Obligations, Etc. If the Manager is for any reason under no legal obligation to discharge any of the Guaranteed Obligations, or if any other moneys included in the Guaranteed Obligations have become unrecoverable from the Manager by operation of law or for any other reason, including, without limitation, the invalidity or irregularity in whole or in part of any Guaranteed Obligation or of any Transaction Document or any limitation on the liability of the Manager thereunder or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever, the guarantees contained in this Agreement shall nevertheless remain in full force and effect in accordance with the terms set forth herein and shall be binding upon the Guarantor to the same extent as if the Guarantor at all times had been the principal debtor on all such Guaranteed Obligations.

5.Additional Guarantees. This Agreement shall be in addition to any other guarantee or other security for the Guaranteed Obligations and it shall not be prejudiced or rendered unenforceable by the invalidity of any such other guarantee or security or by any waiver, amendment, release or modification thereof.

6.Consents and Waivers, Etc. The Guarantor hereby acknowledges receipt of correct and complete copies of each of the Transaction Documents and consents to all of the terms and provisions thereof, as the same may be from time to time hereafter amended or changed in accordance therewith, and waives, to the extent the Guarantor lawfully may do so, (a) presentment, demand for payment, and protest of nonpayment, of any of the Guaranteed Obligations, (b) notice of acceptance of this Agreement and of diligence, presentment, demand and protest, (c) notice of any default hereunder and any default,

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breach or nonperformance or a Manager Event of Default under any of the Guaranteed Obligations or the Transaction Documents, except as expressly provided in Section 3, (d) notice of the terms, time and place of any private or public sale of collateral held as security for the Guaranteed Obligations, (e) demand for performance or observance of, and any enforcement of any provision of, or any pursuit or exhaustion of rights or remedies against the Manager or any other guarantor of the Guaranteed Obligations, under or pursuant to the Transaction Documents, or any agreement directly or indirectly relating thereto and any requirements of diligence or promptness on the part of the holders of the Guaranteed Obligations in connection therewith, and (f) any and all demands and notices of every kind and description with respect to the foregoing or which may be required to be given by any statute or rule of law.

7.No Impairment, Etc. The obligations, covenants, agreements and duties of the Guarantor under this Agreement shall not be affected or impaired by any assignment or transfer in whole or in part of any of the Guaranteed Obligations without notice to the Guarantor, or any waiver by HPT or any holder of any of the Guaranteed Obligations or by the holders of all of the Guaranteed Obligations of the performance or observance by the Manager or any other guarantor of any of the agreements, covenants, terms or conditions contained in the Guaranteed Obligations or the Transaction Documents or any indulgence in or the extension of the time for payment by the Manager or any other guarantor of any amounts payable under or in connection with the Guaranteed Obligations or the Transaction Documents or any other instrument or agreement relating to the Guaranteed Obligations or of the time for performance by the Manager or any other guarantor of any other obligations under or arising out of any of the foregoing or the extension or renewal thereof, or the modification or amendment made with the consent of the Guarantor of any duty, agreement or obligation of the Manager or any other guarantor set forth in any of the foregoing, or the voluntary or involuntary sale or other disposition of all or substantially all the assets of the Manager or any other guarantor or insolvency, bankruptcy, or other similar proceedings affecting the Manager or any other guarantor or any assets of the Manager or any such other guarantor, or the release or discharge of the Manager or any such other guarantor from the performance or observance of any agreement, covenant, term or condition contained in any of the foregoing without the consent of the holders of the Guaranteed Obligations by operation of law.

8.Reimbursement, Subrogation, Etc. The Guarantor hereby covenants and agrees that the Guarantor will not enforce or

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otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against the Manager or any other person with respect to the Guaranteed Obligations prior to the irrevocable payment in full of all amounts then due and owing but unpaid under the Management Agreement, and until the Guaranteed Obligations have been satisfied in full, the Guarantor shall not have any right of subrogation, and the Guarantor waives any defense it may have based upon any election of remedies by HPT which destroys the Guarantor’s subrogation rights or the Guarantor’s rights to proceed against the Manager for reimbursement, including, without limitation, any loss of rights the Guarantor may suffer by reason of any rights, powers or remedies of the Manager in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging the indebtedness to HPT. Until all obligations of the Manager pursuant to the Transaction Documents shall have been irrevocably paid and satisfied in full, the Guarantor waives any right to enforce any remedy which HPT now has or may in the future have against the Manager, any other guarantor or any other person and any benefit of, or any right to participate in, any security whatsoever now or in the future held by HPT. Nothing contained in this Section 8 shall limit any of Guarantor’s rights under the Management Agreement.

9.Defeasance; Guaranty Limitations. The Guarantor’s obligations under Section 3 shall terminate upon the first to occur of (a) the date on which the Guaranteed Obligations have been paid and performed in full and all other obligations of the Guarantor to HPT under this Agreement have been irrevocably satisfied in full and (b) the Coverage Date; provided, however, if at any time, all or any part of any payment applied on account of the Guaranteed Obligations is or must be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Manager), this Agreement, to the extent such payment is or must be rescinded or returned, shall be deemed to have continued in existence notwithstanding any such termination. Notwithstanding anything contained in this Agreement to the contrary, in no event shall the Guarantor’s liability under Section 3 hereof exceed the sum of Fifty Million Dollars ($50,000,000) less (ii) the aggregate amount paid by the Guarantor under Section 3 in excess of the aggregate of any amounts reimbursed to it pursuant to the terms of the Management Agreement.

10.Notices. (a)  Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Agreement shall be deemed adequately given if in writing and the same shall be delivered either by

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hand, by telecopier with written acknowledgment of receipt (provided a copy thereof is sent by Federal Express or similar expedited commercial carrier for delivery on the next business day), or Federal Express or similar expedited commercial carrier, addressed to the recipient of the notice, postpaid and registered or certified with return receipt requested (if by mail), or with all freight charges prepaid (if by Federal Express or similar carrier).

(b)  All notices required or permitted to be sent hereunder shall be deemed to have been given for all purposes of this Agreement upon the date of acknowledged receipt, in the case of a notice by telecopier, and, in all other cases, upon the date of receipt or refusal, except that whenever under this Agreement a notice is either received on a day which is not a Business Dayor is required to be delivered on or before a specific day which is not a Business Day, the day of receipt or required delivery shall automatically be extended to the next Business Day.

(c)  All such notices shall be addressed,

if to HPT to:

c/o Hospitality Properties Trust

400 Centre Street

Newton, Massachusetts 02458

Attn:  Mr. John G. Murray

[Telecopier No. (617) 969-5730]

with a copy to:

Sullivan & Worcester LLP

One Post Office Square

Boston, Massachusetts 02109

Attn:  Warren M. Heilbronner, Esq.

[Telecopier No. (617) 338-2880]

if to the Guarantor to:

Intercontinental Hotels Group PLC

67 Alma Road

Windsor

Berkshire SL4 3HD

ENGLAND

Attn: Company Secretary

Telecopier No. +44 1753 410101

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with a copy to:

Intercontinental Hotels Resources Group, Inc.

Three Ravinia Drive

Suite 100

Atlanta, Georgia 30346

Attn:  Vice President, Asset Management

[Telecopier No. 770-604-5340]

(d)  By notice given as herein provided, the parties hereto and their respective successors and assigns shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses effective upon receipt by the other parties of such notice and each shall have the right to specify as its address any other address within the United States of America.

11.Successors and Assigns. Whenever in this Agreement, any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, including without limitation the holders, from time to time, of the Guaranteed Obligations; and all representations, warranties, covenants and agreements by or on behalf of the Guarantor which are contained in this Agreement shall inure to the benefit of HPT’s successors and assigns, including, without limitation, such holders, whether so expressed or not.

12.Applicable Law. Except as to matters regarding the internal affairs of HPT and issues of or limitations on any personal liability of the shareholders and trustees of HPT for obligations of HPT, as to which the laws of the State of Maryland shall govern, this Agreement and any other instruments executed and delivered to evidence, complete or perfect the transactions contemplated hereby shall be interpreted, construed, applied and enforced in accordance with the laws of New York applicable to contracts between residents of New York which are to be performed entirely within New York, regardless of (i) where any such instrument is executed or delivered; or (ii) where any payment or other performance required by any such instrument is made or required to be made; or (iii) where any breach of any provision of any such instrument occurs, or any cause of action otherwise accrues; or (iv) where any action or other proceeding is instituted or pending; or (v) the nationality, citizenship, domicile, principal place of business, or jurisdiction of organization or domestication of any party; or (vi) whether the laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction other than Massachusetts; or (vii) any combination of the foregoing.

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All actions and proceedings arising out of or in any way relating to this Agreement shall be brought, heard, and determined exclusively in an otherwise appropriate federal or state court located within the State of New York. Guarantor hereby (i) submits to the exclusive jurisdiction of any New York federal or state court of otherwise competent jurisdiction for the purpose of any action or proceeding arising out of or relating to this Agreement and (ii) voluntarily and irrevocably waives, and agrees not to assert by way of motion, defense, or otherwise in any such action or proceeding, any claim or defense that it is not personally subject to the jurisdiction of such a court, that such a court lacks personal jurisdiction over Guarantor or the matter, that the action or proceeding has been brought in an inconvenient or improper forum, that the venue of the action or proceeding is improper, or that this Agreement may not be enforced in or by such a court. To the maximum extent permitted by applicable law, Guarantor consents to service of process by registered mail, return receipt requested, or by any other manner provided by law.

To the maximum extent permitted by applicable law, each of the parties hereto waives its rights to trial by jury with respect to this Agreement or any matter arising in connection herewith.

13.Modification of Agreement. No modification or waiver of any provision of this Agreement, nor any consent to any departure by the Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by HPT, and such modification, waiver or consent shall be effective only in the specific instances and for the purpose for which given. No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in the same, similar or other circumstances.

14.Waiver of Rights by HPT. Neither any failure nor any delay on HPT’s part in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise, or the exercise of any other right, power or privilege.

15.Severability. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, but this Agreement shall be reformed and construed and enforced to the maximum extent permitted by applicable law.

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16.Entire Contract. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof.

17.Headings; Counterparts. Headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument, and in pleading or proving any provision of this Agreement, it shall not be necessary to produce more than one of such counterparts.

18.Remedies Cumulative. No remedy herein conferred upon HPT is intended to be exclusive of any other remedy, and subject to the limitations set forth in Section 9 above, each and every remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

19.Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING TRUST, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT, AND THE GUARANTOR HEREBY AGREES THAT, THE NAME “HOSPITALITY PROPERTIES TRUST” REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, TRUST. ALL PERSONS DEALING WITH TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

20.Effective Date. This Agreement shall be of no force or effect unless and until the Effective Date occurs.

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WITNESS the execution hereof under seal as of the date above first written.

		INTERCONTINENTAL HOTELS GROUP PLC
		By:
			Its:
		By:
			Its:
ACKNOWLEDGED AND AGREED:
HPT TRS IHG-1, INC.
By:
	Its:
HOSPITALITY PROPERTIES TRUST
By:
Its:

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EXHIBIT B

NEW STAYBRIDGE GUARANTY

GUARANTY AGREEMENT

THIS GUARANTY AGREEMENT (this “Agreement”) is made and given as of                      , 20    , by INTERCONTINENTAL HOTELS GROUP PLC, a corporation organized and existing under the laws of England and Wales (the “Guarantor”), for the benefit of HPT TRS IHG-1, INC., a Maryland corporation (together with its successors and assigns, the “Tenant”), and HOSPITALITY PROPERTIES TRUST, a Maryland real estate investment trust (together with its successors and assigns, “Trust”; and Trust together with the Tenant, “HPT”).

W I T N E S S E T H :

WHEREAS, on January     , 2006, the Guarantor delivered to HPT that certain Amended and Restated Consolidated Guaranty Agreement (the “Consolidated Guaranty”); and

WHEREAS, both the IHG4 Coverage Date and the IHG5 Coverage Date (as such terms are defined in the Consolidated Guaranty) have occurred and the Guarantor wishes to terminate its obligations under the Consolidated Guaranty in accordance with Section 10 of the Consolidated Guaranty; and

WHEREAS, Section 10 of the Consolidated Guaranty requires, among other things, that the Guarantor deliver this Guaranty Agreement to HPT in order to terminate its obligations under the Consolidated Guaranty as aforesaid; and

WHEREAS, the termination of its obligations under the Consolidated Guaranty as aforesaid constitutes a direct material benefit to the Guarantor;

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the mutual receipt and legal sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Certain Terms. Capitalized terms used and not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Management Agreement. The

following terms as used in this Agreement shall have the meanings set forth below:

“Accounting Principles” shall mean generally accepted accounting principles, as adopted in the United States of America, consistently applied or, if the Guarantor’s principal place of business is the United Kingdom, generally accepted accounting principles, as adopted in the United Kingdom, consistently applied.

“Collateral Agency Agreement” shall mean a written agreement, in form and substance reasonably acceptable to HPT, among HPT, the Guarantor and the Collateral Agent pursuant to which the Collateral Agent shall agree to hold any cash delivered to such Collateral Agent pursuant to the terms of this Agreement as collateral agent on behalf of HPT, as the same may be amended, restated, supplemented or otherwise modified from time to time with the consent of the parties thereto. Among other things, the Collateral Agency Agreement shall provide that (a) the Collateral Agent shall look solely to the Guarantor for any amounts owed to the Collateral Agent in connection with such agreement, (b) the Collateral Agent shall not offset any amount owed to the Collateral Agent against the cash delivered to it pursuant to the Collateral Agency Agreement and this Agreement, (c) the Collateral Agent shall hold such cash as trust funds and not commingle such cash with any assets of the Collateral Agent and (d) HPT shall be entitled to apply any cash collateral held by the Collateral Agent to the overdue obligations of the Guarantor hereunder in such order and at such times as HPT may determine in its sole judgment.

“Collateral Agent” shall mean a bank or other financial institution reasonably acceptable to HPT having a rating of not less than BBB-/Baa3 rating from the Rating Agencies, which bank or other financial institution is the collateral agent under the Collateral Agency Agreement as such collateral agent may be replaced in accordance with the terms of the Collateral Agency Agreement.

“Coverage Date” shall mean the date which is the day after the second (2^nd) consecutive calendar year for which the Priority Coverage Ratio is equal to or exceeds 1.3.

“Guaranteed Obligations” shall mean the payment to Tenant of (a) all of the Owner’s Priority as and when due under the Management Agreement determined without respect to Gross Revenue or Operating Profits and (b) any and all liquidated damages due to Tenant under the Management Agreement.

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“Management Agreement” shall mean [that certain Amended and Restated Management Agreement, dated as of January     . 2005], between TRS1 and Manager, with respect to certain hotels being operated under the “Staybridge” brand] [that certain Management Agreement, dated as of July 1, 2003, between TRS1 and Manager] as the same may be amended, modified, supplemented, or otherwise altered from time to time.

“Manager” shall mean Intercontinental Hotels Group Resources, Inc.

“Outstanding Balance” shall mean, from time to time, the Seventy Million Dollars ($70,000,000) less the excess of the aggregate amount paid by the Guarantor under Section 3 hereof over the aggregate amount reimbursed to the Guarantor pursuant to Section 10.1(l) of the Management Agreement.

“Provide Collateral” or “Provided Collateral” shall mean:

(a)delivery to HPT of (i) a Satisfactory Letter of Credit or (ii) cash in an amount equal to the then Outstanding Balance; or

(b)the deposit of cash equal to the then Outstanding Balance with the Collateral Agent to be held by the Collateral Agent in accordance with the Collateral Agency Agreement provided:(i) the Collateral Agency Agreement has been executed and delivered by the parties thereto; (ii) HPT has a perfected first priority security interest in any cash delivered to the Collateral Agent; (iii) HPT has received favorable opinions of counsel, in form and substance reasonably satisfactory to HPT, with respect to such perfected first priority interest, the valid existence and good standing of the other parties to the Collateral Agency Agreement, the due execution and delivery thereof by such other parties, the enforceability of the Collateral Agency Agreement against such parties, and that any cash held by the Collateral Agent pursuant to the Collateral Agency Agreement shall not be “property of the estate” of Collateral Agent should any event described in Sections 17.1(a), (b) or (c) of the Management Agreement shall occur with respect to the Collateral Agent; or

(c)delivery to HPT of other collateral satisfactory to HPT in its good faith discretion to secure the Guaranteed Obligations;

provided, however, the Guarantor shall not be deemed to have Provided Collateral if at any time the Outstanding Balance exceeds the sum of (i) the then remaining balance drawable under

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the Satisfactory Letter of Credit or the balance of the cash deposited by the Guarantor hereunder, plus (ii) proceeds of any Satisfactory Letter of Credit or cash deposited hereunder, in either case, applied to the Guaranteed Obligations.

“Priority Coverage Ratio” shall mean, for any period, the ratio of (a) the excess of Gross Revenue for such period over the sum of the amounts distributed or applied for such period pursuant to Sections 10.1(a), (b), (e), (g), (h), (i), (k) and (l) of the Management Agreement, to (b) the sum for such period of Owner’s Priority and Owner’s Percentage Priority.

“Rating Agencies” shall mean, collectively, Standard’s & Poor’s Rating Services or its successor and Moody’s Investor Services, Inc. or its successors; provided, however, if the Rating Agencies (i) cease operations without successors or (ii) cease to issue credit ratings, “Rating Agencies” shall mean a nationally recognized organization periodically issuing ratings of the financial strength and/or credit of United States domestic and international banking institutions reasonably agreed to by HPT and the Guarantor.

“Reorganization” shall mean any merger, consolidation, reorganization, change of control or any transaction pursuant to which the Guarantor shall be or become a Subsidiary of any other Person.

“Satisfactory Letter of Credit” shall mean a clean irrevocable letter of credit in form and substance reasonably satisfactory to HPT in an amount equal to the Outstanding Balance issued by a bank with a credit rating of not less than A2/A (or, if after the date hereof the system of ratings used by the Rating Agencies changes in a material way, their then equivalents of such credit rating in HPT’s reasonable judgment) from the Rating Agencies, having an expiration date of not earlier than one year after the date on which it was issued and which permits for partial draws.

“Substitute Guarantor” shall mean a Person who assumes the Guarantor’s obligations hereunder in accordance with the terms of Section 2.7 below and is either (a) a Person who satisfies the Rating Agencies’ requirements for a single purpose bankruptcy remote entity who has Provided Collateral or (b) a Person(s) with (i) a tangible net worth determined in accordance with the Accounting Principles not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars (exclusive of any note, instrument, security or claim issued by,

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against or in any way dependent on the credit of, an Affiliate of Guarantor).

2.Representations and Covenants. The Guarantor represents, warrants, covenants and agrees that:

2.1Validity of Agreement. The Guarantor has duly and validly executed and delivered this Agreement; this Agreement constitutes the legal, valid and binding obligation of the Guarantor, enforceable against the Guarantor in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws of general application affecting the rights and remedies of creditors; and the execution, delivery and performance of this Agreement have been duly authorized by all requisite action of the Guarantor and such execution, delivery and performance by the Guarantor will not result in any breach of the terms, conditions or provisions of, or conflict with or constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of the property or assets of the Guarantor pursuant to the terms of, any indenture, mortgage, deed of trust, note, other evidence of indebtedness, agreement or other instrument to which the Guarantor is a party or by which the Guarantor or any property or assets of the Guarantor is bound, or violate any provision of law applicable to the Guarantor, or any order, writ, injunction, judgement or decree of any court applicable to the Guarantor or any order or other public regulation of any governmental commission, bureau or administrative agency applicable to the Guarantor.

2.2Payment of Expenses. The Guarantor agrees, as principal obligor and not as guarantor only, to pay to HPT forthwith, upon demand, in immediately available Federal funds, all costs and expenses (including court costs and reasonable legal expenses) incurred or expended by HPT in connection with the enforcement of this Agreement, together with interest at the Interest Rate on amounts recoverable under this Agreement from the time such amounts become due until payment.

2.3Reports. The Guarantor shall timely deliver to HPT the Consolidated Financials required under the Management Agreement and otherwise comply with the terms of the Management Agreement applicable to it.

2.4Financial Condition of Guarantor; Status of Guarantor. So long as the Guarantor’s obligations under Section 3 below are outstanding, unless the Guarantor shall have Provided Collateral to secure its obligations hereunder:

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(a)The Guarantor shall at all times maintain a tangible net worth determined in accordance with the Accounting Principles in an amount not less than Five Hundred Million Dollars ($500,000,000) or if there has been a Reorganization, or if the Guarantor is not the originally named Guarantor, Seven Hundred Fifty Million Dollars ($750,000,000); and

(b)The Guarantor shall not engage in any Reorganization unless following such Reorganization it has (i) a tangible net worth determined in accordance with the Accounting Principles in an amount not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars ($100,000,000) (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor).

2.5Security. Upon the termination of the Guarantor’s obligations under Section 3 or if the excess of aggregate amount paid by the Guarantor under Section 3 over the aggregate amount reimbursed to it pursuant to Section 10.1(l) of the Management Agreement equals not less than Fifty Million dollars ($50,000,000), HPT will return to the Guarantor any Satisfactory Letter of Credit previously delivered to HPT or any unapplied cash collateral then being held by HPT hereunder and shall direct the Collateral Agent to return any cash being held by it under the Collateral Agency Agreement to the Guarantor. HPT shall be entitled to draw upon any Satisfactory Letter of Credit delivered to it (a) for the full amount thereof if at any time there is less than thirty (30) days until the expiry date of such Satisfactory Letter of Credit; (b) for the full amount thereof if the bank that issued such Satisfactory Letter of Credit shall not have a credit rating of at least A/A2 (or, if after the date hereof the system of ratings used by the Rating Agencies changes in a material way, their then equivalents in HPT’s reasonable judgment) from the Rating Agencies and such satisfactory Letter of Credit shall not have been replaced within thirty (30) days with a new Satisfactory Letter of Credit delivered to HPT; or (c) to the extent and in the amounts then due and payable hereunder, if the Guarantor shall fail to pay or perform any of its obligations under this Guaranty in accordance with the terms hereof. HPT shall be entitled to apply any cash collateral held by it or the Collateral Agent to the overdue obligations of the Guarantor hereunder in such order and at such times as HPT may determine in its sole judgment. Any cash collateral held by HPT shall not be commingled with its other funds, and shall be invested, at the Guarantor’s risk, in interest bearing investments reasonably acceptable to the

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Guarantor. Any interest on such cash collateral, and any losses in such investments, shall belong to IHG.

2.6Legal Existence. The Guarantor shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence. The Guarantor has appointed attorneys Alston & Bird LLP, having an address at 1201 West Peachtree Street, Atlanta, Georgia 30309-3424, Attn:  Managing Partner as its agent for service of process. Managing Partner as its agent for service of process. The Guarantor acknowledges and agrees that service of process on such agent shall constitute service of process on Guarantor with respect to any and all claims hereunder or under any other Transaction Document.

2.7Substitute Guarantor. The then Guarantor (the “Departing Guarantor”) shall be released from obligations under Section 3 hereof on the following terms and conditions:

(a)a Substitute Guarantor shall assume pursuant to a written instrument satisfactory to HPT all of the Guarantor’s obligations hereunder; and

(b)HPT shall receive an opinion of counsel satisfactory to HPT with respect to, among other things, the existence and good standing of the Substitute Guarantor and the due execution, delivery and enforceability of such assumption.

Upon the satisfaction of the foregoing conditions and the expiration of all applicable preference or similar periods, HPT shall deliver a release to the Departing Guarantor of its obligations hereunder and the Substitute Guarantor shall be deemed the “Guarantor” hereunder. Further, if the Substitute Guarantor has Provided Collateral or has (i) a tangible net worth determined in accordance with the Accounting Principles of not less than Seven Hundred Fifty Million Dollars ($750,000,000) and (ii) unencumbered assets with a fair market value of not less than One Hundred Million Dollars (exclusive of any note, instrument, security or claim issued by, against or in any way dependent on the credit of, an Affiliate of Guarantor), HPT shall return to the Departing Guarantor any letter of credit or cash delivered by the Departing Guarantor and held by HPT hereunder and shall direct the Collateral Agent to return to the Departing Guarantor any cash delivered by the Departing Guarantor and held by such Collateral Agent pursuant to the terms of the Collateral Agency Agreement.

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3.Guarantee.

(a)The Guarantor hereby unconditionally guarantees that the Guaranteed Obligations which become due and payable during the term of the Management Agreement shall be paid in full when due and payable subject to any applicable cure periods, whether upon demand, at the stated or accelerated maturity thereof or upon any mandatory or voluntary prepayment pursuant to any Transaction Document, or otherwise.

(b)This guarantee is a guarantee of payment and not of collectibility and is absolute and in no way conditional or contingent. In case any part of the Guaranteed Obligations shall not have been paid when due and payable or performed at the time performance is required, subject to any applicable cure periods, the Guarantor shall, pay or cause to be paid to HPT the amount thereof as is then due and payable and unpaid (including interest and other charges, if any, due thereon through the date of payment in accordance with the applicable provisions of the Transaction Documents) or perform or cause to be performed such obligations in accordance with the Transaction Documents. Simultaneously with the giving of any notice of default to the Manager under the Management Agreement, Tenant shall give a copy of such notice to the Guarantor. Tenant shall accept any cure of such default by the Guarantor provided such cure is completed within the applicable cure period under the Management Agreement.

4.Unenforceability of Guaranteed Obligations, Etc. If the Manager is for any reason under no legal obligation to discharge any of the Guaranteed Obligations, or if any other moneys included in the Guaranteed Obligations have become unrecoverable from the Manager by operation of law or for any other reason, including, without limitation, the invalidity or irregularity in whole or in part of any Guaranteed Obligation or of any Transaction Document or any limitation on the liability of the Manager thereunder or any limitation on the method or terms of payment thereunder which may now or hereafter be caused or imposed in any manner whatsoever, the guarantees contained in this Agreement shall nevertheless remain in full force and effect in accordance with the terms set forth herein and shall be binding upon the Guarantor to the same extent as if the Guarantor at all times had been the principal debtor on all such Guaranteed Obligations.

5.Additional Guarantees. This Agreement shall be in addition to any other guarantee or other security for the Guaranteed Obligations and it shall not be prejudiced or rendered unenforceable by the invalidity of any such other

B-8

guarantee or security or by any waiver, amendment, release or modification thereof.

6.Consents and Waivers, Etc. The Guarantor hereby acknowledges receipt of correct and complete copies of each of the Transaction Documents and consents to all of the terms and provisions thereof, as the same may be from time to time hereafter amended or changed in accordance therewith, and waives, to the extent the Guarantor lawfully may do so, (a) presentment, demand for payment, and protest of nonpayment, of any of the Guaranteed Obligations, (b) notice of acceptance of this Agreement and of diligence, presentment, demand and protest, (c) notice of any default hereunder and any default, breach or nonperformance or a Manager Event of Default under any of the Guaranteed Obligations or the Transaction Documents, except as expressly provided in Section 3, (d) notice of the terms, time and place of any private or public sale of collateral held as security for the Guaranteed Obligations, (e) demand for performance or observance of, and any enforcement of any provision of, or any pursuit or exhaustion of rights or remedies against the Manager or any other guarantor of the Guaranteed Obligations, under or pursuant to the Transaction Documents, or any agreement directly or indirectly relating thereto and any requirements of diligence or promptness on the part of the holders of the Guaranteed Obligations in connection therewith, and (f) any and all demands and notices of every kind and description with respect to the foregoing or which may be required to be given by any statute or rule of law.

7.No Impairment, Etc. The obligations, covenants, agreements and duties of the Guarantor under this Agreement shall not be affected or impaired by any assignment or transfer in whole or in part of any of the Guaranteed Obligations without notice to the Guarantor, or any waiver by HPT or any holder of any of the Guaranteed Obligations or by the holders of all of the Guaranteed Obligations of the performance or observance by the Manager or any other guarantor of any of the agreements, covenants, terms or conditions contained in the Guaranteed Obligations or the Transaction Documents or any indulgence in or the extension of the time for payment by the Manager or any other guarantor of any amounts payable under or in connection with the Guaranteed Obligations or the Transaction Documents or any other instrument or agreement relating to the Guaranteed Obligations or of the time for performance by the Manager or any other guarantor of any other obligations under or arising out of any of the foregoing or the extension or renewal thereof, or the modification or amendment made with the consent of the Guarantor of any duty, agreement or obligation of the Manager or any other

B-9

guarantor set forth in any of the foregoing, or the voluntary or involuntary sale or other disposition of all or substantially all the assets of the Manager or any other guarantor or insolvency, bankruptcy, or other similar proceedings affecting the Manager or any other guarantor or any assets of the Manager or any such other guarantor, or the release or discharge of the Manager or any such other guarantor from the performance or observance of any agreement, covenant, term or condition contained in any of the foregoing without the consent of the holders of the Guaranteed Obligations by operation of law.

8.Reimbursement, Subrogation, Etc. The Guarantor hereby covenants and agrees that the Guarantor will not enforce or otherwise exercise any rights of reimbursement, subrogation, contribution or other similar rights against the Manager or any other person with respect to the Guaranteed Obligations prior to the irrevocable payment in full of all amounts then due and owing but unpaid under the Management Agreement, and until the Guaranteed Obligations have been satisfied in full, the Guarantor shall not have any right of subrogation, and the Guarantor waives any defense it may have based upon any election of remedies by HPT which destroys the Guarantor’s subrogation rights or the Guarantor’s rights to proceed against the Manager for reimbursement, including, without limitation, any loss of rights the Guarantor may suffer by reason of any rights, powers or remedies of the Manager in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging the indebtedness to HPT. Until all obligations of the Manager pursuant to the Transaction Documents shall have been irrevocably paid and satisfied in full, the Guarantor waives any right to enforce any remedy which HPT now has or may in the future have against the Manager, any other guarantor or any other person and any benefit of, or any right to participate in, any security whatsoever now or in the future held by HPT. Nothing contained in this Section 8 shall limit the Guarantor’s rights under Section 10.1(l) of the Management Agreement.

9.Defeasance; Guaranty Limitations. The Guarantor’s obligations under Section 3 shall terminate upon the first to occur of (a) the date on which the Guaranteed Obligations have been paid and performed in full and all other obligations of the Guarantor to HPT under this Agreement have been irrevocably satisfied in full and (b) the Coverage Date; provided, however, if at any time, all or any part of any payment applied on account of the Guaranteed Obligations is or must

B-10

be rescinded or returned for any reason whatsoever (including, without limitation, the insolvency, bankruptcy or reorganization of the Manager), this Agreement, to the extent such payment is or must be rescinded or returned, shall be deemed to have continued in existence notwithstanding any such termination. Notwithstanding anything contained in this Agreement to the contrary, the Guarantor’s liability under Section 3 hereof in the aggregate shall not exceed (a) for the period ending on December 31, 2005, (i) Fifty Million Dollars ($50,000,000) with respect to the portion of Owner’s Priority attributable to the Original Hotels and (ii) an additional Sixteen Million Dollars ($16,000,000) with respect to the portion of Owner’s Priority attributable to the Expansion Hotels, and (b) thereafter, Seventy Million Dollars ($70,000,000) with respect to the entire amount of Owner’s Priority; provided, however, such liability shall be reduced by any advances made by Manager under Section 10.3 of the Management Agreement which Manager elects to be deemed advances hereunder pursuant to said Section and such liability shall be increased by any reimbursements made to the Guarantor pursuant to Section 10.1(l) of the Management Agreement.

10.Notices. (a)  Any and all notices, demands, consents, approvals, offers, elections and other communications required or permitted under this Agreement shall be deemed adequately given if in writing and the same shall be delivered either by hand, by telecopier with written acknowledgment of receipt (provided a copy thereof is sent by Federal Express or similar expedited commercial carrier for delivery on the next business day), or Federal Express or similar expedited commercial carrier, addressed to the recipient of the notice, postpaid and registered or certified with return receipt requested (if by mail), or with all freight charges prepaid (if by Federal Express or similar carrier).

(b)  All notices required or permitted to be sent hereunder shall be deemed to have been given for all purposes of this Agreement upon the date of acknowledged receipt, in the case of a notice by telecopier, and, in all other cases, upon the date of receipt or refusal, except that whenever under this Agreement a notice is either received on a day which is not a Business Dayor is required to be delivered on or before a specific day which is not a Business Day, the day of receipt or required delivery shall automatically be extended to the next Business Day.

B-11

(c)  All such notices shall be addressed,

if to HPT to:

c/o Hospitality Properties Trust

400 Centre Street

Newton, Massachusetts  02458

Attn:  Mr. John G. Murray

[Telecopier No. (617) 969-5730]

with a copy to:

Sullivan & Worcester LLP

One Post Office Square

Boston, Massachusetts  02109

Attn:  Warren M. Heilbronner, Esq.

[Telecopier No. (617) 338-2880]

if to the Guarantor to:

Intercontinental Hotels Group PLC

67 Alma Road

Windsor

Berkshire SL4 3HD

ENGLAND

Attn: Company Secretary

Telecopier No. +44 1753 410101

with a copy to:

Intercontinental Hotels Group, Inc.

Three Ravinia Drive

Suite 100

Atlanta, Georgia 30346

Attn:  Vice President, Asset Management

[Telecopier No. 770-604-5340]

(d)  By notice given as herein provided, the parties hereto and their respective successors and assigns shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses effective upon receipt by the other parties of such notice and each shall have the right to specify as its address any other address within the United States of America.

11.Successors and Assigns. Whenever in this Agreement, any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party, including without limitation the holders, from time to time, of

B-12

the Guaranteed Obligations; and all representations, warranties, covenants and agreements by or on behalf of the Guarantor which are contained in this Agreement shall inure to the benefit of HPT’s successors and assigns, including, without limitation, such holders, whether so expressed or not.

12.Applicable Law. Except as to matters regarding the internal affairs of HPT and issues of or limitations on any personal liability of the shareholders and trustees of HPT for obligations of HPT, as to which the laws of the State of Maryland shall govern, this Agreement and any other instruments executed and delivered to evidence, complete or perfect the transactions contemplated hereby shall be interpreted, construed, applied and enforced in accordance with the laws of New York applicable to contracts between residents of New York which are to be performed entirely within New York, regardless of (i) where any such instrument is executed or delivered; or (ii) where any payment or other performance required by any such instrument is made or required to be made; or (iii) where any breach of any provision of any such instrument occurs, or any cause of action otherwise accrues; or (iv) where any action or other proceeding is instituted or pending; or (v) the nationality, citizenship, domicile, principal place of business, or jurisdiction of organization or domestication of any party; or (vi) whether the laws of the forum jurisdiction otherwise would apply the laws of a jurisdiction other than Massachusetts; or (vii) any combination of the foregoing.

All actions and proceedings arising out of or in any way relating to this Agreement shall be brought, heard, and determined exclusively in an otherwise appropriate federal or state court located within the State of New York. Guarantor hereby (i) submits to the exclusive jurisdiction of any New York federal or state court of otherwise competent jurisdiction for the purpose of any action or proceeding arising out of or relating to this Agreement and (ii) voluntarily and irrevocably waives, and agrees not to assert by way of motion, defense, or otherwise in any such action or proceeding, any claim or defense that it is not personally subject to the jurisdiction of such a court, that such a court lacks personal jurisdiction over Guarantor or the matter, that the action or proceeding has been brought in an inconvenient or improper forum, that the venue of the action or proceeding is improper, or that this Agreement may not be enforced in or by such a court. To the maximum extent permitted by applicable law, Guarantor consents to service of process by registered mail, return receipt requested, or by any other manner provided by law.

B-13

To the maximum extent permitted by applicable law, each of the parties hereto waives its rights to trial by jury with respect to this Agreement or any matter arising in connection herewith.

13.Modification of Agreement. No modification or waiver of any provision of this Agreement, nor any consent to any departure by the Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by HPT, and such modification, waiver or consent shall be effective only in the specific instances and for the purpose for which given. No notice to or demand on the Guarantor in any case shall entitle the Guarantor to any other or further notice or demand in the same, similar or other circumstances.

14.Waiver of Rights by HPT. Neither any failure nor any delay on HPT’s part in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise, or the exercise of any other right, power or privilege.

15.Severability. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, but this Agreement shall be reformed and construed and enforced to the maximum extent permitted by applicable law.

16.Entire Contract. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and shall supersede and take the place of any other instruments purporting to be an agreement of the parties hereto relating to the subject matter hereof.

17.Headings; Counterparts. Headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument, and in pleading or proving any provision of this Agreement, it shall not be necessary to produce more than one of such counterparts.

18.Remedies Cumulative. No remedy herein conferred upon HPT is intended to be exclusive of any other remedy, and subject to the limitations set forth in Section 9 above, each and every remedy shall be cumulative and shall be in addition to every

B-14

other remedy given hereunder or now or hereafter existing at law or in equity or by statute or otherwise.

19.Nonliability of Trustees. THE DECLARATION OF TRUST ESTABLISHING TRUST, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE “DECLARATION”), IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT, AND THE GUARANTOR HEREBY AGREES THAT, THE NAME “HOSPITALITY PROPERTIES TRUST” REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF TRUST SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, TRUST. ALL PERSONS DEALING WITH TRUST, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF TRUST FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.

B-15

WITNESS the execution hereof under seal as of the date above first written.

		INTERCONTINENTAL HOTELS GROUP PLC
		By:
			Its:
ACKNOWLEDGED AND AGREED:
HPT TRS IHG-1, INC.
By:
	Its:
HOSPITALITY PROPERTIES TRUST
By:
	Its:

B-16

EX-12.1

EXHIBIT 12.1

Hospitality Properties Trust

Computation of Ratio of Earnings to Fixed Charges

(in thousands, except ratio amounts)

	Year Ended December 31,
	2005		2004		2003		2002		2001
Net income	$	129,903	$	127,091	$	238,213	$	142,202	$	131,956
Fixed charges	65,263		50,393		44,536		42,424		41,312
Adjusted earnings	$	195,166	$	177,484	$	282,749	$	184,626	$	173,268
Fixed charges:
Interest on indebtedness and amortization of deferred finance costs	$	65,263	$	50,393	$	44,536	$	42,424	$	41,312
Ratio of earnings to fixed charges	2.99x		3.52x		6.35x		4.35x		4.19x

EX-12.2

EXHIBIT 12.2

Hospitality Properties Trust

Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Distributions

(in thousands, except ratio amounts)

	Year Ended December 31,
	2005		2004		2003		2002		2001
Net income	$	129,903	$	127,091	$	238,213	$	142,202	$	131,956
Fixed charges	65,263		50,393		44,536		42,424		41,312
Adjusted earnings	$	195,166	$	177,484	$	282,749	$	184,626	$	173,268
Fixed charges and preferred distributions:
Interest on indebtedness and amortization of deferred finance costs	$	65,263	$	50,393	$	44,536	$	42,424	$	41,312
Preferred distributions	7,656		9,674		14,780		7,572		7,125
Total combined fixed charges and preferred distributions	$	72,919	$	60,067	$	59,316	$	49,996	$	48,437
Ratio of earnings to combined fixed charges and preferred distributions	2.68x		2.95x		4.77x		3.69x		3.58x

EX-21.1

EXHIBIT 21.1

HOSPITALITY PROPERTIES TRUST

SUBSIDIARIES OF THE REGISTRANT

Name	State of Formation, Organization or Incorporation
Candlewood Jersey City – Urban Renewal, L.L.C.	New Jersey
Harbor Court Associates, LLC	Maryland
HH HPT Suite Properties LLC	Delaware
HH HPTCW II Properties LLC	Delaware
HH HPTCY Properties LLC	Delaware
HH HPTMI III Properties LLC	Delaware
HH HPTRI Properties LLC	Delaware
HH HPTWN Properties LLC	Delaware
HPT CW MA Realty Trust	Massachusetts
HPT CW Overland Park LLC	Maryland
HPT CW Properties Trust	Maryland
HPT HSD Properties Trust	Maryland
HPT IHG Canada Corporation	New Brunswick
HPT IHG Canada Properties Trust	Delaware
HPT IHG GA Properties LLC	Maryland
HPT IHG PR, Inc.	Puerto Rico
HPT IHG Properties Trust	Maryland
HPT IHG-2 Properties Trust	Maryland
HPT IHG-3 Properties LLC	Maryland
HPT IHG-3 Properties Trust	Maryland
HPT TRS IHG-3, Inc.	Maryland
HPT LA Properties Trust	Maryland
HPT Smokey Mountain LLC	Delaware
HPT Suite Properties Trust	Maryland
HPT TRS IHG-1, Inc.	Maryland
HPT TRS IHG-2, Inc.	Maryland
HPT TRS MI-135, Inc.	Delaware
HPT TRS SPES II, Inc.	Maryland
HPT TRS, Inc.	Delaware
HPTCY Properties Trust	Maryland
HPTMI Hawaii, Inc.	Delaware
HPTMI II Properties Trust	Maryland
HPTMI Properties Trust	Maryland
HPTRI Properties Trust	Maryland
HPTSHC Properties Trust	Maryland
HPTSY Properties Trust	Maryland
HPTWN Properties Trust	Maryland

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-3 Nos. 333-84064, 333-43573, 333-89307 and 333-109658) of Hospitality Properties Trust and in the related Prospectuses of our reports dated March 3, 2006, with respect to the consolidated financial statements and schedule of Hospitality Properties Trust, Hospitality Properties Trust management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Hospitality Properties Trust, included in the 2005 Annual Report (Form 10-K) for the year ended December 31, 2005.

	/s/ Ernst & Young LLP
Boston, Massachusetts
March 8, 2006

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, Barry M. Portnoy, certify that:

1.I have reviewed this annual report on Form 10-K of Hospitality Properties Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 13, 2006	/s/ Barry M. Portnoy
	Barry M. Portnoy
	Managing Trustee

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, Gerard M. Martin, certify that:

1.I have reviewed this annual report on Form 10-K of Hospitality Properties Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 13, 2006	/s/ Gerard M. Martin
	Gerard M. Martin
	Managing Trustee

EX-31.3

EXHIBIT 31.3

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, John G. Murray, certify that:

1.I have reviewed this annual report on Form 10-K of Hospitality Properties Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 13, 2006	/s/ John G. Murray
	John G. Murray
	President and Chief Operating Officer

EX-31.4

EXHIBIT 31.4

CERTIFICATION PURSUANT TO EXCHANGE ACT RULES 13a-14(a) AND 15d-14(a)

I, Mark L. Kleifges, certify that:

1.I have reviewed this annual report on Form 10-K of Hospitality Properties Trust;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 13, 2006	/s/ Mark L. Kleifges
	Mark L. Kleifges
	Treasurer and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification Pursuant to 18 U.S.C. Sec. 1350

(Section 906 of the Sarbanes – Oxley Act of 2002)

In connection with the filing by Hospitality Properties Trust (the “Company”) of the Annual Report on Form 10-K for the year ended December 31, 2005 (the “Report”), each of the undersigned hereby certifies, to the best of his knowledge:

1.The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

2.The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Barry M. Portnoy	/s/ John G. Murray
Barry M. Portnoy	John G. Murray
Managing Trustee	President and Chief
	Operating Officer
/s/ Gerard M. Martin	/s/ Mark L. Kleifges
Gerard M. Martin	Mark L. Kleifges
Managing Trustee	Treasurer and Chief
	Financial Officer